This paper reexamines a recent contribution to the theory of wealth accumulation under income uncertainty by Ricardo Caballero in this Review. First we develop a more general model which generates a richer variety of results and this enables us to place the role of income uncertainty into a more...

An organization faces a stream of random events everyday. Whether to set managerial rules or allow managerial discretion is a key issue in organizations. In this paper, we investigate the boundaries between rules and discretion in authority. Using an incomplete contract approach, we...

We investigate the determinants of cross-border venture capital (VC) performance using a large sample of 10,205 cross-border VC investments by 1,906 foreign VC firms (VCs) in 6,535 domestic portfolio companies. We focus on the impact of a domestic country's economic freedom on the performance of...

This paper investigates the determinants of cross-border venture capital (VC) performance in the Chinese VC market. We focus on the impact of foreign VC firms' (VCs') human capital and domestic entrepreneurs' experience on the performance of both VC investments and portfolio companies using...

In recent years, mandatory convertibles are becoming a popular means of raising capital, especially for large companies. This paper is the first theoretical paper to investigate mandatory convertibles using the incomplete-contract approach. We show that mandatory convertibles can be an efficient...

Organizations have sometimes been observed to reallocate control rights horizontally or vertically. Evidence suggests that they do this in response to certain kinds of internal or external challenges. Grounded in the contingency theory, this paper develops a theory of the vertical reallocation...

This paper presents a theory on how firm structure responds to market competitiveness. Firms have often been observed to reallocate control rights, sometimes in response to market competition. We develop a theory on the dependence of firm structure on market competition using an incomplete...

Whether to set managerial rules or allow managerial discretion is a key issue in organizations. In this paper, we investigate the boundaries between rules and discretion in the firm. Using an incomplete contract approach, we differentiate between projects that are more efficiently managed under...

As an extension of Wang & Zhu (2005), this short paper shows that the popular 51:49 equity structure can be optimal. This equity structure in joint ventures (JVs) has puzzled economists the world over. We find that, when the two parties are highly asymmetric in their abilities to acquire private...

Investors often behave in puzzling ways. In this paper, we develop a theory that implies “unusual” investor behaviors in a market equilibrium with heterogeneous investors who formulate their investment strategies based on their individual assessments of market signals, where market signals...