We survey the theory and evidence of behavioral corporate finance, which generally takes one of two approaches. The market timing and catering approach views managerial financing and investment decisions as rational managerial responses to securities mispricing. The managerial biases approach...

I examine the effects of entrenchment on corporate investment and firm performance. To achieve identification, I use a novel measure of entrenchment and an instrumental variable based on firms' IPO cohort. I find that entrenchment reduces capital expenditures, R&D, and productivity, weakens a...

We examine three information channels through which product market interactions in an industry can affect firms' incentives to misreport financial information to investors. We find that lower product market sensitivity to individual firm' information and greater use of relative performance...

In this paper I review the definition of weighted average cost of capital and derive the discount coefficient of the firm's cash flows which preserves linearity of the present value function within each discounting period, i.e. in each discounting period the sum of the present value of each cash...

We examine the effects of entrenchment on corporate investment and firm performance. To achieve identification, we use a novel measure of entrenchment and an instrumental variable based on firms' IPO cohort. We find that entrenchment reduces capital expenditures, R&D, and productivity, weakens a...

Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, real-world firm managers consistently say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take firm managers...

We survey the theory and evidence of behavioral corporate finance, which generally takes one of two approaches. The market timing and catering approach views managerial financing and investment decisions as rational managerial responses to securities mispricing. The managerial biases approach...

Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, the people running large public corporations say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take...

Legal investor protection is associated with how firms choose to issue shares. The likelihood of private placements relative to rights offerings increases with investor protection, as does the likelihood of public offerings relative to both private placements and rights offerings. These findings...

Over the period 1980-2007 multinational firms' investment grew four times faster than worldwide GDP. Yet the evidence on whether global diversification is valuable is inconclusive. This paper uses detailed FDI data for 251 UK multinational firms and 4,676 subsidiaries to show that multinational...