We analyze a private firm’s choice of exit mechanism between initial public offerings (IPOs) and acquisitions, and we provide a resolution to the “IPO valuation premium puzzle.” The private firm is run by an entrepreneur and a venture capitalist (VC) (insiders) who desire to exit partially...

Using a hand-collected data set of private firm acquisitions and IPOs, this paper develops the first empirical analysis in the literature of the “IPO valuation premium puzzle,” which refers to a situation where many private firms choose to be acquired rather than to go public at higher...

We develop a theory of new-project financing and equity carve-outs under heterogeneous beliefs. In our model, an employee of a firm generates an idea for a new project that can be financed either by issuing equity against the cash flows of the entire firm ("integration"), or by undertaking an...

We analyze the roles of entrepreneurs, venture capitalists (VC), and the government in financing fundamental innovations, defined as those with positive social value net of development costs, but negative net present values to innovating firms. We first analyze the case where the entrepreneur,...

We theoretically analyze the editorial process in scientific journals. In our model, a journal editor maximizes his journal's expected payoff from publishing high quality papers, net of costs due to (mistakenly) publishing low quality papers. The editor, with a prior probability assessment...

We analyze the dynamics of private firms' exit choice between IPOs and acquisitions and the valuation premium of IPOs over acquisitions from pre-2000 to post-2000. We first develop a two-period theoretical model, where in each period, entrepreneurs with private information about the viability of...