Using a matched sample of firms that do and do not undertake major investments we find that CEO incentives with option-based asymmetric payoffs greatly increase the likelihood that a firm will increase risk by undertaking both major real investments and acquisitions. In contrast, equity-based...

We evaluate the impact of stock market transparency and opacity design features on global trading activity, including the share of traded value for cross-listed stocks. Our methodology relies on a system of simultaneous structural equations estimated for the world's major exchanges. We find that...

According to the quot;keeping up with the Jonesquot; theory promulgated by compensation consultants, compensation disclosure is responsible for increases in executive pay levels. Jensen and Murphy (1990a), however, contend that disclosure is responsible for a decline in performance pay, as...

Following Constantinides' (1986) seminal approach and introducing transaction costs in the Pagano (1989) model, conventional CARA investors with heterogeneous endowments trade to construct optimal portfolios. We calibrate to the 1896-1994 equity and bond markets to show that gains from trade are...

We examine the price impact cost of block trades across three trading mechanisms: the upstairs market, a crossing network system, and the limit order book. While, unsurprisingly, both the upstairs market and crossing system provide lower price impact costs for block trades than downstairs, using...

We present new direct empirical evidence in support of Rosen's (1982) 'cloning' hypothesis, explaining the overwhelming firm size-executive pay effect in terms of a predicted greater superiority in managerial talent the larger is the firm. We show that executives from better performing firms are...

The important and highly influential Amihud and Mendelson (1986) model of asset pricing incorporating immutable security trading by a continuum of investors/traders is unnecessarily opaque because of a flaw in the numerical simulation which I correct. Moreover, the exposition by Kane (1994) and...

Recent theoretical models have shown that liquid stock markets can improve the alignment of managers' and shareholders' interests even though high stock turnover would seem to be incompatible with the traditional view of monitoring of management by a stable set of shareholders. We test the...

Yes. I aim to establish empirically that the quot;equity premiumquot; puzzle, with its 6% excess return per annum over Treasury bills for the last 100 years on the NYSE, can be explained once the value of endogenous stock market trading is incorporated into investor preferences. Within my...

We use unique data from Australia to analyze the nature and determinants of order flow frag-mentation across all trades and every security traded. Our panel regression estimates shows that cross-sectional difference in off-market trading (ECNs, after-hours and upstairs trading alike) is driven...