We analyze the firm-level and aggregate consequences of equity market imperfections in the form of noisy information aggregation for corporate risk-taking and investment. Market imperfections cause controlling shareholders to invest too much in upside risks and too little in downside risks in an...

In competitive economies with private firm ownership, incomplete markets, and firm shareholders changing over time, several firm objectives have been proposed. Some are useful to understand efficiency of equilibria, and others are explicitly consistent with majority shareholder control or...