Leverage offers not only its own directional implications for both risk and reward, but also facilitates superior tests of risk-reward theories: Leverage can change with and without corporate intervention, sometimes even discontinuously. In better-identified contexts, it is more difficult to...

We develop a model of internal governance where the self-serving actions of top management are limited by the potential reaction of subordinates. Internal governance can mitigate agency problems and ensure that firms have substantial value, even with little or no external governance by...

We develop measures of the management quality of firms and make use of a unique sample of hand-collected data to examine the relationship between the reputation and quality of a firm's management and its financial policies, a relationship that has so far received little attention in the...

This paper reexamines MM's dividend and capital structure irrelevance theorems, refuting the first and confirming the latter from the inside out framework. The paper cooperates with Garry and Linda DeAngelo's papers on the irrelevance of the MM's dividend irrelevance theorem and refutes...

We develop measures of the management quality of firms and make use of a unique sample of hand-collected data to examine the relationship between the reputation and quality of a firm's management and its financial and investment policies, a relationship that has so far received little attention...

To obtain more funds from the institutional investors, private equity fund managers may report inflated valuations of private investee companies that are not yet sold. However, such overvaluations may result in a reputational cost when those investments are realized. Using evidence from 39...

In his seminal paper, Bruno de Finetti (1957) laid the foundations of what would become an increasingly popular branch of risk theory: the study of dividend strategies. The recent burst of research in this field encouraged the author to carry out a systematic literature review of modern...

Both market timing and investment-based theories of corporate financing predict underperformance after firms raise capital, but only market timing predicts that the composition of financing (equity compared to debt) should also forecast returns. In cross-sectional tests, we find that the amount...

This paper studies how industry peers respond when another firm in the industry is the subject of a hostile takeover attempt. We document two major responses. First, the industry peers cut their capital spending, free cash flows, and cash holdings, and increase their leverage and payouts to...

We develop a general model of lending in the presence of endogenous borrowing constraints. Borrowing constraints arise because borrowers face limited liability and debt repayment cannot be perfectly enforced. In the model, the dynamics of debt are closely linked with the dynamics of borrowing...