We investigate the functioning of internal capital markets in Indian Business Groups. We document that intra-group loans are an important means of transferring cash across group firms and that such transfers are typically used to support the financially weaker firms. Groups significantly...

We investigate the effect of poor performance on financial intermediary reputation by estimating the effect of large-scale bankruptcies among a lead arranger's borrowers on its subsequent syndication activity. Consistent with reputation damage, such lead arrangers retain larger fractions of the...

We analyze a publicly-traded firm's decision to stay public or go private when managerial autonomy from shareholder intervention affects the supply of productive inputs by management. We show that both the advantage and the disadvantage of public ownership relative to private ownership lie in...

This paper argues that the organization of an internal capital market can influence an affiliated firm's dividend policy. The intuition is developed in a model in which business groups -- several independent firms owned and controlled by a family -- operate an internal capital market that uses...

We predict a positive relationship between the liquidity of the firm's assets and the liquidity of its stock. This relationship depends on market expectations regarding the deployment of the firm's liquid assets. Thus our hypothesis links stock liquidity to managerial actions that change the...

While standard contract theory suggests that a CEO should be paid relative to a benchmark that removes the effects of sector performance (otherwise referred to as luck), there is overwhelming evidence that CEO pay is strongly and positively related to such luck. In this paper we offer an...

Do public equity markets serve a unique role that is not easily served by other forms of financing in emerging economies? We analyze this question using the collapse of India's equity market in 1997, which provides an exogenous shock to firms' ability to issue equity. We find that both public...

While executive compensation is often blamed for the excessive risk taking by banks, little is known about the operating performance incentives used in the finance industry both prior to and subsequent to the recent crisis. We provide a comprehensive analysis of incentive design -- the link of...