The control of carbon emissions by policymakers poses the corporate challenge of developing an optimal carbon management policy. We provide a unified model that characterizes how firms should optimally manage emissions through production, green investment, and the trading of carbon credits. We...

We develop a model to examine how discount rates affect the nature and composition of innovation within an industry. Challenging conventional wisdom, we show that higher discount rates do not discourage firm innovation when accounting for the industry equilibrium. Higher discount rates deter...

This paper develops and empirically tests a model designed to distinguish the roleof real and …nancing frictions on fi…rms´investment, debt …nancing and equity …nancingpolicies. Real frictions include …xed costs of investment and adjustment costs. Financ-ing frictions include taxes,...

This paper develops a signalling game in which the decision to raise public equityis a real option of the …rm. Firms may use multiple signals to reveal their type:the timing of the IPO, the fraction of shares issued and the underpricing of shares.The model provides a tractable approach for...

This paper develops a real options model in which firms may use the timing of their IPOs to signal the quality of their investment prospects to outside investors. When adverse selection is more relevant (cold markets), firms with better investment prospects accelerate their IPO relative to their...

We study whether, how, and why the investment of a firm depends on the investment of other firms in the same product market. Using an instrumental variable based on the presence of local knowledge externalities, we find a sizeable complementarity of investment among product market peers, holding...

Banks finance newly-founded firms extensively despite severe asymmetric information. Whereas the demand for credit usually follows from entrepreneurs' lack of liquidity, we ask why and how banks supply credit to new firms of unknown value. We propose a model of credit allocation in which, due to...