The purpose of the this paper is to study the design of securities when a firm must raise external capital from an asymmetrically informed capital market and when the firm has operating discretion in the management of the capital raised that embodies the essence of the asset substitution...

We provide experimental evidence that nonbinding preplay 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...

We examine corporate issuance and payout policies in the presence of both adverse selection (in capital markets) and managerial opportunism. Our results establish the importance of the locus of decision control in the firm. When shareholders determine policies, debt financing is always optimal...

In this paper we investigate the effects of regulatory policies on troubled banks. In our analysis banks' portfolio decisions are unobservable and are made by management. Management's decisions are influenced by the compensation and intervention policies of shareholders and regulators as well as...

We examine competition between groups of producers when consumers prefer costly `ethical' production technologies. Consumers are unable to identify or monitor production technologies. Producers can freeride on their group's `reputation' by substituting cheaper `unethical' technologies. When an...

The authors analyze the optimal design of debt maturity, coupon payments, and dividend payout restrictions under asymmetric information. They show that, if the asymmetry of information is concentrated around long-term cash flows, firms finance with coupon-bearing long-term debt that partially...

We present an economic mechanism and supportive empirical evidence for the transmission of information between equity securities first documented by Lo and MacKinlay (1990). It is argued that the past returns on stocks held by informed institutional traders will be positively correlated with the...

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 postacquisition share price. In this paper, we address this question by formulating a nonstandard model of...

The relationship between asset demand and information quality in rational expectations economies is analyzed. First we derive a number of new summary descriptive statistics that measure four basic characteristics of investment style: asset selection, market timing, aggressiveness, and...

Investigates futures market efficiency. Anomalies in asset prices; Test for fads in futures markets; Data description; Price effects; Trading rule tests; Volume effects.