A common theme in the literature on corporate control is that, when share ownership is diffuse, the free-rider problem prevents raiders from making acquisitions at tender prices below the post-acquisition share price. In this paper, we address this question by formulating a nonstandard model of...

It is generally acknowledged that myopic investment policies are one of the pressing problems facing U.S. industry. This paper provides a rationale for such myopic investment policies based on managerial opportunism and the allocation of control rights between shareholders and managers. In the...

We examine corporate issuance and payout policies in the presence of both adverse selection (in capital markets) and managerial opportunism. We show that, when shareholders determine policies, debt financing is always optimal in the presence of either pure adverse selection or pure managerial...

Our analysis explains how vulture investors (vultures) can build reputations for toughness, and these reputations can be exploited to profit from the purchase of distressed-firm claims. Vultures are able to successfully exploit their reputations both in anonymous and non-anonymous markets. If...

We study contests in which contestants are homogeneous and have convex effort costs. Increasing contest competitiveness, by making prizes more unequal, scaling up the competition, or adding new contestants, always discourages effort. These results have significant implications: although often...

Uncompetitive contests for grades, promotions, retention, and job assignments, which feature lax standards and limited candidate pools, are often criticized for being unmeritocratic. We show that, when contestants are strategic, lax standards and exclusivity can make selection more meritocratic....

This paper develops a new theory of the capital structure of parent--subsidiary organizations based on legal-system arbitrage: The capital structure of parent--subsidiary organizations is chosen to minimize the agency costs generated by selective renegotiation of claims written on the component...

We posit that screening IPOs requires specialized labor which is in fixed supply. A sudden increase in demand for IPO financing increases the compensation of IPO screening labor. This results in reduced screening, encouraging sub-marginal firms to enter the IPO market, further fueling the demand...

We provide experimental evidence that non-binding pre-play communication between bidders in auctions of shares facilitates the adoption of equilibrium strategies: collusive strategies in uniform-price auctions, and the unique equilibrium in undominated strategies in discriminatory auctions. When...

It is generally agreed that stockholder/bondholder agency conflicts are an important factor in the determination of corporate debt maturity policies. It has also frequently been argued that agency considerations favor shorter debt maturities. In this paper, we show that if the locus of the...