The q-theory implies that investment is a first-order determinant of the cross section of expected returns, and that optimal investment drives the external financing anomalies. Our neoclassical model simultaneously and in many cases quantitatively reproduces: Procyclical equity issuance waves;...

This paper documents the short and long term balance sheet effect of cash flow shocks. We show that cash savings in the short run and debt reduction in both the short and the long run account for a substantial fraction of cash flow use. Although, in the long run, investment exhibits substantial...

In a dynamic continuous-time model, we examine the impact of a manager-shareholder conflict over the choice of investment risk on firm value and optimal capital structure. The manager's optimal investment risk policy is substantially different from the policy that maximizes equity or total firm...

It is widely recognized in the field of corporate finance, when valuing a levered project or firm, that the debt tax shield adds value to the unlevered project or firm. However, the value of the tax shield remains subject of debate as Luehrman (1997) points out. Research studies have tended to...

We examine theoretically and experimentally a certain class of new financial instruments which are designed as lotteries on the outcome of prominent sports events like the Soccer World Cup 2006. From a theoretical point of view, sports betting products may be superior to a fixed rate investment...

We survey CFOs of public and private firms in 29 countries about aspects of corporate liquidity that cannot be obtained from publicly available data. We find that lines of credit are very important liquidity instruments relative to cash holdings. The median line of credit is equal to 15 percent...

This paper examines how the provision of venture capital to small and medium sized businesses (SMEs) is influenced by the ownership structure of the venture capital provider. We introduce a new and unique dataset from the Japanese venture capital market, comprising data on investment and venture...

Research in behavioral corporate finance takes two distinct approaches. The first emphasizes that investors are less than fully rational. It views managerial financing and investment decisions as rational responses to securities market mispricing. The second approach emphasizes that managers are...

This paper introduces an analysis of the impact of Legality on the exiting of venture capital investments. We consider a sample of 468 venture-backed companies from 12 Asia-Pacific countries, and these countries' venture capitalists' investments in US-based entrepreneurial firms. The data...

Using a sample of European venture capital investments, I study the relation between venture capital (VC) contracts and exits. The data indicate that ex ante, stronger VC control rights increase the likelihood that an entrepreneurial firm will exit by an acquisition, rather than through a...