Venture capitalists claim to add value to their portfolio companies through their extensive networks. This paper documents a rent-seeking behavior that accompanies this VC keiretsu effect. Using a sample of 570 mergers between venture-backed companies, we find that deals in which the acquirer...

This paper presents a model that incorporates product market competition into the standard neoclassical framework. The model explains why value-maximizing firms conduct mergers that appear to lower shareholder value. In a Cournot setting, the model demonstrates a prisoners' dilemma for merging...

We study the impact of brokerage relations with company insiders on insider-affiliated market makers' quoting behavior and the possibility of information leakage via piggybacking when insiders trade. We find that market makers affiliated with the brokers used by insiders post more aggressive ask...

The common wisdom about sell-side analysts is that their recommendations tend to be overly optimistic under the pressure from their investment banking colleagues. This paper answers the question whether it is the optimistic analyst or the good analyst (an analyst with superior stock-picking...

This paper studies the cross-sectional risk-return trade-off in the stock market. A fundamental principle in finance is the positive relation between risk and expected return, whereas recent empirical evidence suggests the opposite. Using several intuitive risk measures, we show that the...