Executives who own a stake in the firm that they manage tend to be under-diversified and therefore have an incentive to take real actions to smooth earnings. Using a simple principal-agent model, we show that management will use variable pay to transfer risk to employees. The variability of pay...

Takeover defenses are generally viewed as a tool used by entrenched managers to prevent raiders from taking over the firm. As a consequence, activist groups interested in governance reform have recently been arguing for the elimination of such defenses. In this paper we analyze the value impact...

This paper investigates the optimal size and scope of a Venture Capitalist's (VC's) portfolio. We consider a VC who chooses the number of start-ups to invest in his portfolio. In our model, both the VC's and the entrepreneurs' inputs are necessary for the success of the project, making their...

This paper investigates the optimal size and scope of a Venture Capitalist's (VC's) portfolio. We consider a VC who chooses the number of start-ups to invest in his portfolio. In our model, both the VC's and the entrepreneurs' inputs are necessary for the success of the project, making their...

This paper develops a theory of the organization and financing of innovation activities where integration, venture capital financing, and strategic alliances emerge as optimal responses to competitive pressures of the Ramp;D race, research intensity of Ramp;D projects, the stage of the research...

This paper develops a theory of the organization form and financing of innovation activities where integration, venture capital financing, and strategic alliances emerge as optimal responses to competitive pressures of the Ramp;D race, the stage of the research and product development, and the...

We examine how firms adapt their organization when they go public. To conform with the requirements of public capital markets, we expect IPO firms to become more organized, making the firm more accountable and its human capital more easily replaceable. We find that IPO firms transform into a...

This paper studies the growing presence of private equity (PE) acquirers in the hospital industry. We examine employment, operational efficiency and patient outcomes at hospitals acquired by PE firms. While the total employment at target hospitals significantly declines, the proportion of...

This paper investigates the importance of accessing public capital markets through an initial public offering (IPO), and the consequent relaxation of firms’ financial constraints, for firm-level long term employment decisions. We find that firms significantly increase post-IPO investment in...