We explore the effect of financial development on corporate capital structure and the tightness of financial constraints that firms face. We employ an econometric technique which allows us to explicitly test for convergence in capital structure. This technique increases the power of our...

We develop a model that explains two stylized facts - the coarseness of credit ratings relative to the underlying default probabilities, and the countercyclical nature of ratings imprecision. The imprecise nature of coarse ratings arises from the revenue-maximizing behavior of rating agencies,...

In this paper we provide a political game where agents decide whether to become legislators or politicians. Legislators determine the political institutions constraining politicians' behavior and politicians compete for gaining the power to make decisions about the level of the public good. We...

We consider a general economy, where agents have private information about their types. Types can be multi-dimensional and potentially interdependent. We show that, if the interim distribution of types is common knowledge (the exact number of agents for each type is known), then a mechanism...

We study single period asset allocation problems of the investor who maximizes the expected utility with respect to non-additive beliefs. The non-additive beliefs of the investor model the presence of an uncertainty and they are assumed to be consistent with the Maxmin expected utility theory of...

In this paper we describe a model of optimal investment of various types of financially constrained firms. We show that the resulting relationship between internal funds and investment is non-monotonic. In particular, the magnitude of the cash flow sensitivity of the investment is lower for...