We develop a dynamic model of investment, capital structure, leasing, and risk management based on firms' need to collateralize promises to pay with tangible assets. Both financing and risk management involve promises to pay subject to collateral constraints. Leasing is strongly collateralized...

This paper investigates the effect of financing frictions due to source of capital, on firm investment and value. Using instrumental variables approach that controls for endogeneity arising from demand-side factors, we find that firms with access to public debt markets have 11% higher investment...

This paper studies Reverse Asset Substitution (RAS), an agency problem in which banks place investment and borrowing restrictions on firms as part of a strategy to extract surplus from the firms over multiple periods. RAS arises for firms that cannot access public debt markets due to agency...

We examine the effect of ownership and governance structures on what is arguably a firm's most valuable asset: its reputation. We model reputations based on alterable organizational and structural firm characteristics rather than the personal characteristics of the management team. We show that,...

This paper examines how the firm's choice of investment horizon interacts with rent-seeking by privately-informed, multi-tasking managers and the labor market. There are two main results. First, managers prefer longer-horizon projects that permit them to extract higher rents from firms, so...

This paper shows that the underpricing of a one-shot equity offering can be explained as a direct result of personal wealth maximization by the original shareholders. When a firm is taken public to raise capital for investment the original shareholders have to trade-off how much capital to raise...

We investigate the relationship between derivatives use and the extent of asymmetric information faced by the firm. Using alternative analyst forecast proxies for asymmetric information, we find evidence that both the use of derivatives and the extent of derivatives usage is associated with...

We study the empirical link that exists between investment and cash flow in the Swiss financial market. We follow the standard method introduced by Fazarri, Hubbard and Peterson (1988), with two major improvements. The firms' classification method is dynamic, and the estimation procedure allows...

We show that, for a firm facing a high marginal tax rate, the benefit of using debt relative to managerial ownership to control agency costs increases at a decreasing rate. Debt and managerial stock ownership represent alternative mechanisms for reducing agency costs of the relationship between...

Short-term financial claims held by uninformed outside investors impose a tax on insider opportunism by diluting the ownership stake of opportunistic owner-managers. By thus limiting managerial opportunism, short-term financing increases firm value and social welfare. When given a choice,...