We develop a theory of income and payout smoothing by firms when insiders know more about income than outside shareholders, but property rights ensure that outsiders can enforce a fair payout. Insiders set payout to meet outsiders' expectations and underproduce to manage future expectations...

This paper analyzes the timing of mergers that are motivated by economies of scale. We show that the merger synergies are an increasing function of product market demand. Consequently, in the presence of fixed merger costs and stochastic demand, each firm's payoff from merging has call...

This paper presents a dynamic model for the timing and terms of mergers, stock offers and cash offers when the output price for firms is stochastic and when firms have complete information. We show that takeovers motivated by increased returns to scale or by decreased unit production costs are...

Surveys of Chief Financial Officers show that some managers claim to pursue a target adjustment model while others claim to follow alternative financing models. We therefore estimate a model for debt dynamics in which the target adjustment and short-run flow-of-funds coefficients may vary across...

We explore whether theoretically the target leverage and pecking-order models can be reconciled with payout smoothing. Investment absorbs a significant part of income and asset volatility if the firm follows both a payout target and a net debt ratio (NDR) target. A positive (negative) NDR...

This paper considers real options within a continuous-time corporate finance context. We analyze whether these real options are exercised effciently, and what the underlying sources of inefficiency are. In particular we consider the role of incomplete information, competition, search costs and...

We consider a setting in which insiders have information about income that outside shareholders do not, but property rights ensure that outside shareholders can enforce a fair payout. To avoid intervention, insiders report income consistent with outsiders' expectations based on publicly...