Unsolicited credit ratings are issued solely at the discretion of rating agencies based on public information. This paper analyzes firms' incentives to solicit credit ratings to signal their quality and rating agencies' incentives to issue unsolicited ratings. Conditions for two types of...

Social ties between mutual funds and the companies in which they invest (investees) can both facilitate information transfers and encourage favoritism. Using the investment choices of mutual funds in China, we compare investment performance of holdings in companies that are socially connected to...

We develop a two-period general equilibrium model of portfolio delegation with competitive, differentially skilled managers and convex compensation contracts. We show that convex incentives lead to significant equilibrium mispricing, but reduce price volatility. In particular, price...

A model of over-the-counter markets is proposed. Some asset buyers are informed in that they can identify high-quality assets. Heterogeneous sellers with private information choose what type of buyers they want to trade with. When the measure of informed buyers is low, there exists a unique and...

A model of over-the-counter markets is proposed. Some asset buyers are informed in that they can identify high-quality assets. Heterogeneous sellers with private information choose what type of buyers they want to trade with. When the measure of informed buyers is low, there exists a unique...

The study investigates the role of financial development in boosting the investment efficiency of firms' investments in China. Using a large sample of firm-level financial data and country level economic data over the period 2004-2015, present study creates a link between financial and real...

In this study, we propose our hypothesis that the distinguishable principal-agent relationships of German banks are significantly influencing the risk-taking attitudes of bank managers. Particularly, we intend to substantiate the theory that banks owned by dispersed shareholders or federal state...

Using a large sample of U.S. firms for the period 1995-2008, we provide strong and robust evidence that corporate tax avoidance is positively associated with firm-specific stock price crash risk. This finding is consistent with the following view: Tax avoidance facilitates managerial rent...

In modern businesses, firms face new challenges of managerial retention in capital budgeting process. We consider a model in which a manager privately observes the capital productivity of a project and has access to multiple outside financing options. We show that if the manager can obtain...

This paper investigates the reaction of the London Stock Exchange to the announcement of the city hosting 2012 Summer Olympic Games. The expectations of the Olympic Games, are the anticipation of massive economic boosts to the host cities. These expectations are presumed to be translated into...