This paper deals with the CAPM-derived capital budgeting criterion, and in particular with Rubinstein's (1973) criterion, according to which a project is profitable if the project rate of return is greater than the risk-adjusted cost of capital, where the latter depends on the project's...

This paper presents a new way of measuring residual income, originally introduced by Magni (2000a,b,c, 2001a,b, 2003). Contrary to the standard residual income, the capital charge is equal to the capital lost by investors. The lost capital may be viewed as (a) the foregone capital, (b) the...

Counterfactual conditionals are cognitive tools that we incessantly use during our lives for judgments, evaluations, decisions. Counterfactuals are used for defining concepts as well; an instance of this is attested by the notions of opportunity cost and excess profit, two all-pervasive notions...

A recent article in the Economist called attention to the mutual fund industry's flagrantly noncompetitive fee structure, noting that fund managers earn a quot;staggeringquot; profit margin of 42% on average, largely because quot;most fund managers do not compete on price.quot; Despite this...

As Neveu writes - the concept of leverage is very general, in literature it is defined and measured in different ways. In the article we systematize the definitions and the manners of measurement of the three kinds of leverages, distinguishing two approaches: static and dynamic. We prove, that...

I examine the possible impact of venture capital (VC) backing on the commercialization direction of technology-based start-ups by asking: to what extent (if at all) do VC-funded start-ups engage in cooperative commercialization strategies (strategic alliances and/or technology licensing)...

A manager who wants to be viewed favorably has an incentive to advance or delay the arrival of information about his firm's profitability. In the model, a high ability manager tries to advance resolution of a likely-favorable outcome, while a low ability manager may defer resolution. Such...

We analyze a unique survey dataset to examine the (micro)foundations of capital allocation in firms. Firms employ systems of interconnected measures to counteract agency problems, including layers of approval, divisional budgets, reporting requirements, and compensation schemes. When making...

Prior evidence shows a reduction in leverage after covenant violations, but we do not know whether covenants affect leverage before they are violated. In this study, we use an exogenous accounting-based shock to debt covenants that relaxed covenant tightness (SFAS 160) and examine whether...

I examine the consumption and labor decisions of self-employed households when a child goes to college using unique financial transactions data from the linked accounts of small businesses and their owners. Households respond to the increase in education spending by downsizing business...