We investigate firms' optimal investment timing and capacity decisions in the presence of time-to-build and competition. Due to the uncertainty in time-to-build, the product of the leader who makes the first investment might enter the market later than that of the follower. We show that a firm...

This paper studies how the durability of assets affects financing. We show that more durable assets require larger down payments making them harder to finance, because durability affects the price of assets and hence the overall financing need more than their collateral value. Durability affects...

Using a semiparametric smooth-coefficient partial adjustment model, this study finds evidence for asymmetric peer effects on capital structure adjustment speeds between overlevered and underlevered firms. Overlevered firms' adjustment speeds and peer firm shocks have a U-shaped relationship,...

How do firms finance their investment? To what extent does the financing mix depends on the nature or the size of investment? To what extent does the funding mix of investment vary along firm size? Relying on a unique database of firms covering 72% of the value added in France over three...

This paper studies how biases in managerial beliefs affect managerial decisions, firm performance, and the macroeconomy. Using a new survey of US managers I establish three facts. (1) Managers are not over-optimistic: sales growth forecasts on average do not exceed realizations. (2) Managers are...

This article analyzes the optimal design of securities in situations where ex-ante asymmetric information about a firm`s current profit is symmetric and that about future profit is asymmetric. Also a complete contract contingeant on a future profit is impossible to write except establishing...

Firms seem to care a lot about "risk management": the practice of hedging risks whether they are correlated with market risk or not. The standard reasons why widely held corporations might be averse to idiosyncratic risk are based on the principal-agent problem, bankruptcy costs, external...

Most applications of real options analysis assume a single decision-maker uses flexibility to maximize a firm's market value. This paper presents an alternative approach suitable for firms with two utility-maximizing decision-makers who have joint responsibility for setting firm policies. In...

We show that set-up costs are a key determinant of the capital structure of young firms. Theoretically, when firms face high set-up costs, they can only be established by leveraging up and lengthening debt maturity. Empirically, we use a large sample of French firms to show that young firms have...

This paper studies the implication of persistent private information on a firm's optimal financing and investment policies. In a dynamic agency model, an investor supplies capital to an entrepreneur with an opaque production technology. The investor observes neither the true productivity of the...