In many bilateral transactions, the seller fears being underpaid because its outside option is better known to the buyer. We rationalize a variety of observed contracts as solutions to such smart buyer problems. The key to these solutions is to grant the seller upside participation. In contrast,...

This paper analyzes how non-voting shares affect the takeover outcome in a single-bidder model with asymmetric information and private benefit extraction. In equilibrium, the target firm's security-voting structure influences the bidder's participation constraint and in response the...

We examine whether a bidder can use tender offer terms to signal post-takeover security benefits. Neither restricted bids nor cash-equity offers allow the bidder to reveal private information. Since atomistic shareholders extract all the gains in security benefits, signaling equilibria are...

This short paper analyses the tension between "widening" and "deepening" of organizations such as the European Union. Members have the same consumption benefit of reform but weak and strong members differ in their cost of exerting reform efforts. As decisions are taken by unanimity, the reform...

This paper analyses takeovers of companies owned by atomistic shareholders and by one minority blockholder, all of whom can only decide to tender or retain their shares. As private benefit extraction is inefficient, the post-takeover share value increases with the bidder's shareholdings. In a...

We propose that an active takeover market provides incentives by offering acquisition opportunities to successful managers. This allows firms to reduce performance-based compensation and can rationalize loss-making acquisitions. At the same time, takeovers remain a substitute for board dismissal...

We provide a theoretical model to explain the procyclicality of hedge fund activism. In our model, hedge funds which compete to retain investor flows excessively increase the net leverage of target firms in order to deliver high short-term payouts and signal their ability. Such excessive...

We use a broad range of contractual information to assess the empirical relevance of different financial theories of trade credit. The common feature of all financial theories is that suppliers have an advantage over other lenders in financing credit-constrained firms. While the reasons for the...

It is typically less profitable for an opportunistic borrower to divert inputs than to divert cash. Suppliers, therefore, may lend more liberally than banks. This simple argument is at the core of our contract theoretic model of trade credit in competitive markets. The model implies that trade...

This Paper analyses the interaction between legal shareholder protection, managerial incentives, and ownership concentration. In our framework, blockholder and manager are distinct parties and the presence of a blockholder can both protect and hurt minority shareholders. Legal shareholder...