We investigate the cost of capital in a model with an agency conflict between inside managers and outside shareholders. Inside ownership reflects the classic tradeoff between incentives and risk diversification, and the severity of agency costs depends on a parameter representing investor...

We investigate the cost of capital in a model with an agency conflict between inside managers and outside shareholders. Inside ownership reflects the classic tradeoff between incentives and risk diversification, and the severity of agency costs depends on a parameter representing investor...

The average Market Risk Premium (MRP) used in 2011 by professors for the USA (5.7%) is higher than the one used by analysts (5.0%) and companies (5.6%). The standard deviation of the MRP used in 2011 by analysts (1.1%) is lower than the ones of companies (2.0%) and professors (1.6%). Most...

The average MRP used by analysts in the USA (5.1%) was similar to the one used by their colleagues in Europe (5.0%). But the average MRP used by companies in the USA (5.3%) was smaller than the one used by companies in Europe (5.7%), and UK (5.6%).The dispersion of the MRP used was high, but...

Motivated by ongoing debates on investment-cash flow sensitivity (ICFS) and its documented decline and disappearance in the U.S., we investigate the determinants of ICFS. Using firm-level data across 41 countries for the 1993–2013 period, we document an important role of asset tangibility in...

I construct a new proxy for Tobin's q that incorporates the replacement cost of patent capital. This proxy, PI (physical plus intangible) q, explains up to 62% more variation in investment than other proxies for q. Furthermore, investment is more sensitive to PI q than to other proxies for q....

This article studies the effect of cash windfalls on the acquisition policy of companies. As identification I use a German tax reform that permitted firms to sell their equity stakes tax-free. Companies that could realize a cash windfall by selling equity stakes see an increase in the...