This paper presents a theory of outside equity based on the control rights and the maturity design of equity. We show that outside equity is a tacit agreement between investors and management supported by equityholders right to dismiss management regardless of performance and by the lack of a...

This paper investigates the distribution of equity ownership between entrenched corporate insiders and dispersed outsiders when management has the ability to divert or manipulate the cash flows and when it is costly for equity holders to verify or prove any managerial wrongdoing for a third...

This paper develops a theory of mergers and divestitures wherein the motivation for mergers stems from the inability to finance marginally profitable, possibly short-horizon projects as stand-alone entities due to agency problems between managers and potential claimholders. A conglomerate merger...

This paper investigates the design of the control rights and the maturity of securities when management has the ability to divert or manipulate the cash flows, and when it is prohibitively costly for a third party, such as court, to verify or prove any managerial wrongdoing. By endogenizing...

This paper focuses on the dynamic capital structure of firms: Why do firms use verydifferent financial contracts in different stages of their life-cycles? In a model of optimal financial contracting, we investigate whether firms' subsequent financing decisions are affected by the outcome of...

The fastest growing segment of private equity deals are secondary buyouts - sales from one PE fund to another. Using a comprehensive sample of leveraged buyouts we investigate whether SBOs are value-maximizing, or reflect opportunistic behavior. To proxy for adverse incentives, we develop buy...

This paper investigates the optimal design of long-term financial contracts when future investments are non-contractible ex-ante.We show that creditors are willing to write long-term debt if they are granted the right to replace the manager, extend debt maturity and take over the company as a...

This paper demonstrates that in contrast with previous results in the security design literature, nonverifiability of cash flows and managerial ability to divert cash flows as private benefits is compatible with outside equity financing. The only outside equity that is compatible with...

This paper investigates whether predictable patterns that previous empirical work in finance have isolated appear to be persistent and exploitable by portfolio managers. On a sample that is free from survivorship bias we construct a test wherein we simulate the purchases and sales an investor...

This paper develops a model to study how entrepreneurs and venture-capital investors deal with moral hazard, effort provision, asymmetric information and hold-up problems. We explore several financing scenarios, including first-best, monopolistic, syndicated and fully competitive financing. We...