We offer an explanation for why raiders do not acquire the maximum possible toehold prior to announcing a takeover bid. By endogenously modeling the target firm's value following an unsuccessful takeover we demonstrate that a raider may optimally acquire a small toehold even if the acquisition...

In this paper we analyze the resource allocation decision of a manager of a multi division firm whose compensation is based on the firms stock price. We find that internal investments exhibit a positive correlation across the firms divisions. In particular, when two divisions are put into one...

This paper examines how information becomes reflected in prices when investment decisions are delegated to fund managers whose tenure may be shorter than the time it takes for their private information to become public. We consider a sequence of managers, where each subsequent manager inherits...

A commonly held view in the financial and economic literature is that quot;free cash flow is badquot; in the sense that, given the opportunity, shareholders would always choose to minimize its existence. This view of the world has motivated economists such as Jensen (1988, 1993) to conclude that...