In many long-term relationships, parties may be reluctant to reveal their private information in order to benefit from their informational advantage in the future. We point out that the strategic use of debt by an uninformed party induces another party to reveal private information. Our...

We analyse politically motivated privatization design in a bipartisan environment where politicians lack commitment power. Suppose the median class voters a priori favour redistributive policies. If the privatization programme succeeds in allocating enough shares to these citizens, they become...

This paper demonstrates that the monetary policy of the National Bank of Hungary is restrictive and has ignored the liquidity problems raised by the overhang of inter-enterprise liquidity. The implication is that the success of the transition to market is thereby jeopardized.

Does vertical integration reduce or increase transaction costs with external investors? This paper analyzes an incomplete contracts model of vertical integration in which a seller and a buyer with no cash need to finance investments for production. The firm is modeled as a "nexus of contracts"...

This paper analyzes financial institutions' capital allocation decisions when their required equity capital depends on the risk of their projects chosen. We discuss the relevance of strict position limits against discretionary trading through the use of an optimal compensation function. We show...

This paper solves for a firm's optimal cash holding policy within a continuous time, contingent claims framework that has been extended to incorporate most of the significant contracting frictions that have been identified in the corporate finance literature. Under the optimal policy the firm...

Does targeted financial development favor small firms or large ones? And how do resulting changes in the distribution of firm size affect aggregate outcomes? We assess the macroeconomic implications of known stylized facts from the finance literature regarding firm size and financial frictions...

Private equity companies have become a major force in the economic landscape. Financial- and operational-engineering are innovative characteristics of this emerging method of finance. The existing empirical data provide strong evidence that private equity activity contribute positively to the...

We investigate the relation between share prices and the proportion of equity held by institutional investors for a sample of 52 companies quoted on the Athens Stock Exchange over the period from 1991 to 1996. We differ from earlier studies in as much as use is made of a) an explicit share...

This paper proposes a Stochastic Programming (SP) approach for the calculation of the liquidity-adjusted Value-at-Risk (LVaR). The model presented in this paper offers an alternative to Almgren and Chriss’s mean-variance approach (1999 and 2000). In this research, a two-stage stochastic...