This paper develops an approach for valuing flexible production systems using contingent claims pricing. Demand curves for the authors' model's underlying assets (output products) may be downward sloping, in contrast with the standard option pricing assumption. Also, their marginal production...

In contracts susceptible to efficient breach, each party has an American option to breach and pay damages rather than perform. She will repudiate early if the expected decrease in damages liability resulting from her partner's mitigation exceeds the expected value of the terminated contract,...

In this paper we construct a model of a multinational firm with flexibility in sourcing its production and with the ability to use financial markets to hedge exchange rate risk. The firm's need for hedging is directly related to the degree of flexibility, and the production plan it chooses is a...

Cross-holding occurs when listed corporations own securities issued by other corporations. We analyze the effect of cross-holdings on market capitalization and return measures as well as implications for econometric testing of asset pricing theories. We show that cross-holdings generally distort...

This paper investigates whether managers rely on dividends to obtain a higher price in a stock offering and whether the stock price reaction to dividend and offering announcements justifies such a coordination. The evidence does not support either conjecture. Issuing firms are not more likely to...

The authors examine the empirical determinants of debt maturity structure using a maturity structure measure that incorporates detailed information about all of a firm's liabilities. They find that larger, less risky firms with longer-term asset maturities use longer-term debt. Additionally,...

We examine corporate call policy for 1,642 nonconvertible bonds that were called during the period 1975-94. The vast majority of firms delay calls and call when the bond price exceeds the call price. We find that larger, less liquidity constrained firms with a larger opportunity cost of delaying...

This paper shows that the firm has an incentive to issue multiple classes of debt that are differentiated by seniority to enhance securityholder tax-timing option values. The analysis establishes that there is at least one mix of senior and junior debt that maximizes the tax option gain from...

The objective of providing inducements for public utilities to seek to improve the efficiency of their operations has been a longstanding regulatory concern. Among the evolving strategies for furthering that objective is a shift toward what has come to be referred to as "incentive" regulation....