We examine whether capital flows more to high Tobin's q industries and find that it flows more to high q industries from 1971 until 1996 but not from 1997 to 2014. This change is due to a decrease in the q-sensitivity of equity funding resulting mostly from the increased q-sensitivity of...

With functionally efficient capital markets, we expect capital to flow more to the industries with the best growth opportunities. As a result, these industries should invest more and see their assets grow more relative to industries with the worst growth opportunities. We find that industries...

We show that the manager of a sufficiently undervalued firm is incentivized to allocate financial slack for a share repurchase to gain an immediate, risk free, and corporate tax free wealth transfer from uninformed shareholders, instead of undertaking a real investment with long term, risky, and...

We investigate the role of financialization in the decline of investment for U.S. non-financial firms from 1992 - 2017. We show that the tendency to maximize shareholder value, fuelled by stock-based manager compensation, has led U.S. firms to divert resources from real investment to share...

We estimate a dynamic investment model in which firms finance with equity, cash, or debt. Misvaluation affects equity values, and firms optimally issue and repurchase overvalued and undervalued shares. The funds flowing to and from these activities come from investment, dividends, or net cash....

This paper modeled the dynamic inter-relationships between average salary, bonus, and stock options granted to top executives of 700 U.S. firms using a merged ExecuComp and Compustat database. The effects of stock options granted and exercised on firms' share repurchases and research and...

We investigate the association between passive investment and share repurchases, both at historically high levels and the subject of scrutiny. We argue passive investors offer little monitoring over managerial actions such as repurchase activities, so managers of firms with high levels of...

Investor-driven "short-termism" is said to harm EU public firms' ability to invest for the long term, prompting calls for the EU to better insulate managers from shareholder pressure. But the evidence offered---rising levels of repurchases and dividends---is incomplete and misleading: it ignores...

This paper studies the macroeconomic effects of a 1982 SEC rule that made share buybacks a viable alternative to dividends for paying out funds to shareholders. I propose a quantitative model of heterogeneous firms with dividend adjustment costs and a manager-shareholder conflict, matched to...

Just as portfolio managers are seeking positive alpha, corporate investors are seeking Tobin's q larger than 1. The present paper develops a quantitative framework in which this process can be analyzed, and prescriptions for concrete financing decisions can be obtained. Specifically, we focus on...