A recent dramatic rise in the assets managed by passive corporate debt funds has profound implications for firm financing and payout policy. I use fund-specific flows to isolate exogenous increases in firm-level passive debt ownership at a firm. Firms respond to higher levels of passive debt...

This study addresses the debate over the relation between institutional ownership and dividend payout through the lens of the agency theory. We hypothesize that only institutional investors with certain traits are likely to monitor and conditioning on firms' financial performance, they will use...

Firms added to the S&P 500 index join a prestigious and exclusive club. They want to fit in the club, which creates a “keeping up with the Joneses” effect. Firms pay more attention to their index peers after inclusion and their investment, external financing, and payouts comove more with...

This paper provides a dissection of the Collateralized Loan Obligation (CLO) market and examines the significance of covenants in facilitating the provision of credit. Since the Great Financial Crisis of 2008, the leveraged loan market has witnessed unprecedented growth. CLOs play an...

In the dual model, the surplus of a company is a Levy process with sample paths that are skip-free downwards. In this paper, the aggregate gains process is the sum of a shifted compound Poisson process and an independent Wiener process. By means of Laplace transforms, it is shown how the...

The direct financial impact of the financial crisis has been to deal a heavy blow to investment-based pensions; many workers lost a substantial portion of their retirement saving. The financial sector implosion produced an economic crisis for the rest of the economy via high unemployment and...

In this paper we analyze performance-based remuneration for risk-averse managers in a Black Scholes-type model. We assume that the firm's performance is influenced by an industry and a firm-specific risk. A relative performance compensation which rewards a manager relative to the exogenous...

We propose a “noisy signaling" hypothesis of open market share repurchase (OMSR) programs, where the equity market equilibrium that prevails after OMSR program announcements is a partial pooling rather than a fully separating equilibrium. We argue that two complementary mechanisms, namely,...

This paper studies the mismatch between asset managers' performance window and the time average of their benchmark dividend payouts, commonly referred to as duration. Our asset pricing equilibrium mechanism provides the first plausible theoretical foundation for the recent empirical findings...

Banks face two different kinds of moral hazard problems: asset substitution by shareholders (e.g., making risky, negative net present value loans) and managerial rent seeking (e.g., investing in inefficient “pet” projects and consuming perquisites that yield private benefits). The privately...