We examine the role of financial analysts in forming institutional investors' investment decisions. We model how a fund manager invests in a stock based on reports produced by a biased sell-side analyst and an unbiased buy-side analyst. She weighs the two reports in her decision making, and puts...

We document that acquiring firms are more likely than non-acquiring firms to split their stocks before making acquisition announcements, especially when acquisitions are financed by stock and when the deals are large. Our findings support the hypothesis that some acquiring firms use stock splits...

We examine the role of financial analysts in forming institutional investors' investment decisions. In our model, a fund manager invests in a stock based on the optimal weighting of reports created by a biased sell-side analyst and an unbiased buy-side analyst. The manager puts a higher weight...

We analyze a firm's choice between dividend payments and stock repurchases under heterogeneous beliefs and the subsequent long-term stock return performance of firms adopting the two forms of payout. Firm insiders, owning a certain fraction of its equity, choose between paying out its cash...

We study an environment with short sale constraints and heterogeneous beliefs among outsiders and between insiders and outsiders. Firm insiders choose between equity, debt, and convertible debt to raise external financing. We analyze two settings: one where heterogeneous beliefs is the only...

In the absence of market imperfections, the mutuality principle leads to efficient risk sharing and the Pareto optimal asset allocations. With market imperfections such as transaction costs and information asymmetry, risk-sharing becomes costly, and it can even lead to financial crises. We...