The financing decision is taken based on the expectations concerning the future cash-flows generated in the operating activity, which should provide coverage for the debt service and allow for an increase of the shareholders’ wealth. Still, the future cash-flows are affected by risk, which...

Business groups in emerging markets perform better than unaffiliated firms. One explanation is that business groups substitute some functions of missing institutions, for example, enforcing contracts. We investigate this by setting up a model where firms within the business group are connected...

Common institutional ownership has become a significant form of shareholding in the capital market. Using panel data on 2395 listed companies in China from 2007 to 2020, we examine the investment efficiency of this ownership practice on microcorporate investment behavior. The estimates indicate...

Using a proprietary, project-level dataset on the film industry, I study a cross-section of expected returns on real investments. Expected returns are increasing and concave in the idiosyncratic dollar variance of a film's payoff, unlike in markets where such risk can be diversified. Expected...

We develop a simple model of investment in business groups subject to moral hazard. Our model suggests that productivity and pledgeable income are the drivers of resources in the internal capital markets of these groups. This prediction can be use to explain on the grounds of efficiency some...

Land, capital and labor are the three primary components of production. This basic relation can be readily applied to the commercial property market where land in a primary location, capital improvements (buildings) built on the land, and dedicated employees impact performance and returns. The...

This paper studies corporate risk management in a context of financial constraints and imperfect competition in the product market. The paper shows that interactions between firms affect their hedging strategies. As a general rule, firms' hedging demands decrease with the correlation between...

We extend Triole (2006) to link together two seemingly different cases – firms facing potential free cash flow problems versus firms facing financial constraints. The model predicts a large number of disparate findings in the empirical literature and so demonstrates its usefulness.

In this paper we investigate to what extent firm investment in transition countries is sensitive to internal finance. We use accounts data of over 4000 companies in four countries at different stages of transition. We find that firms in Bulgaria and Romania are less sensitive to internal...

In this paper, we examine net investment during the early stages of transition using micro data on the population of medium and large industrial firms in the Czech Republic during the 1992-95 period. We examine the relevance of alternative models of investment and test if investment behavior...