Prior literature argues that stock-for-stock mergers are often financed by overvalued stock. How do a target's institutional owners trade when faced with a stock-financed bid, particularly one from an acquirer more likely to be overvalued? If institutional owners perceive the acquirer's stock as...

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...

To estimate the grant-date expense of their employee stock options (ESOs), as required under the new accounting rules (FAS 123R), companies have typically had to choose among various theoretical valuation models because there is no secondary market for ESOs. Different models, all permissible...

It is widely believed that contrary to standard asset allocation theory, employees irrationally hold concentrated investments in company stock in their 401(k) plans thus bearing firm-specific risk that could otherwise have been diversified away [See for example, Benartzi (2001)]. However, in...

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 show that closed-end fund managers can reduce their fund discount by adopting a target distribution policy that commits the fund to distribute at least 10% of its net assets each year. In some cases it is evident that the distribution policy is adopted in response to takeover threats and...

We examine underwriting fees for repeat issuers of new securities to determine the relation between loyalty to an underwriting bank and the fees charged. For a sample of offers over the 1975-2001 period, we find that loyalty is associated with lower fees for common stock offers, consistent with...

It is well known that historically a larger number of firms issue common stock and the proportion of external financing accounted for by equity is substantially higher in expansionary phases of the business cycle. We show that this phenomenon is consistent with firms selling seasoned equity when...

We examine underwriting fees for repeat issuers of new securities to determine the relation between loyalty to an underwriting bank and the fees charged. For a sample of offers over the 1975-2001 period, we find that loyalty is associated with lower fees for common stock offers, consistent with...

Close to 50% of municipal bonds are pre-packaged with insurance at the time of issue. We offer a tax-based rationale for the emergence of third-party insurance of tax-exempt bonds. We argue that insurance adds value as it allows a third party to become, in a probabilistic sense, an issuer of...