This paper takes a novel approach to estimating bankruptcy costs by inference from market prices of equity and put options using a dynamic structural model of capital structure. This approach avoids the selection bias of looking at firms in or near default and therefore permits theories of ex...

This paper takes a novel approach to estimating bankruptcy costs by inference from market prices of equity and put options using a dynamic structural model of capital structure. This approach avoids the selection bias of looking at firms in or near default and therefore permits theories of ex...

We study asset management decisions of three competing student managed funds in Vienna Austria for a 10 year period. This real-world experience allows us to precisely test the tournament effect of fund management, the disposition effect and managerial team size. We find support for risk taking...

Financial institutions are facing increased pressure to enhance shareholder value. This has lead to the popularity of practical techniques such as EVA and RAROC. The major purpose of this study is to illustrate the interaction between incentive-based compensation and performance evaluation in a...

Equity capital allocation plays a particularly important role for financial institutions such as banks, who issue equity infrequently but have continuous access to debt capital. In such a context this paper shows that EVA and RAROC based capital budgeting mechanisms have economic foundations. We...

Intermediaries such as financial advisers serve as an interface between portfolio managers and investors. A large fraction of their compensation is often provided through kickbacks from the portfolio manager. We provide an explanation for the widespread use of intermediaries and kickbacks....

This paper examines bankruptcy costs using market prices of equity and put options during the financial crisis. Our approach avoids the downward selection bias and the upward bias when using the tradeoff theory to estimate bankruptcy costs. While the average bankruptcy cost is about 20%, we find...

There is significant interest in how university endowments manage money and perform, and an emerging strand of finance research specializes in this growing area. The purpose of this paper is to survey and review the state-of-the-art in this field. We classify papers into four areas. (1) asset...

Fifty years after publication of Milton Friedman's seminal article in the NY Times Magazine, the question of corporate social responsibility (CSR) remains an important topical issue. We provide a role for CSR in a fully rational framework even when shareholders care only about profit...

Does more competition lead to more information production and greater investment efficiency? This question is largely unexplored in the finance literature. This paper provides both a model and a series of extensive empirical tests. The model features a two-stage Bayesian game in differentiated...