We hypothesize that established firms with innovative projects and technologies will make relatively greater use of arm's length financing (such as public debt and equity); whereas less innovative firms will tend to use relationship based borrowing (such as bank borrowing). The hypothesis is...

We argue that powerful CEOs induce their boards to shift the weight on performance measures towards the better performing measures, thereby rigging the incentive part of their pay. The intuition is developed in a simple model in which some powerful CEOs exploit superior information and lack of...

We investigate the importance of reputation-based implicit contracts in firm financing in the context of Indian Business Groups. The group structure enables us to cleanly analyze the negative spillovers on other firms, triggered by a member firm defaulting on its debt obligations. We hypothesize...

We investigate the functioning of internal capital markets in Indian Business Groups. We document that intra-group loans are an important means of transferring cash across group firms and that such transfers are typically used to support the financially weaker firms. Groups significantly...

This paper argues that the organization of an internal capital market can influence an affiliated firm's dividend policy. The intuition is developed in a model in which business groups -- several independent firms owned and controlled by a family -- operate an internal capital market that uses...