The constraint on informal finance is commonly taken to be high costs and limited supply. But the majority of informal investors - family and friends - is often willing to supply funds at negative returns, and yet many borrowers tap family and friends only as a last resort. We explain this...

This study examines globalization of monitoring practices by focusing on how American (U.S.) influences on European firms impact the dismissal risk for these firms' CEOs. Specifically, we argue that the stronger short term orientation of the American corporate governance system increase the...

This study examines how globalization of corporate governance practices influence the risk of European CEOs being dismissed. We argue that the harsh monitoring of the American corporate governance system spills over to the rest of the world as a result of this globalization. We focus on direct...

Private equity owned firms have more leverage, more intense compensation contracts, and higher productivity than comparable firms. We develop a theory of buyouts in oligopolistic markets that explains these facts. Private equity firms are more aggressive in inducing restructuring compared to...

Using linked employer-employee data from Sweden, a difference-in-difference approach, and 201 private equity buyouts undertaken between 1998 and 2004, we show that unemployment risk declines and labor income increases for employees in the wake of a private equity buyout. Unemployment risk...

Private equity firms are an important part of the industrial restructuring process. We argue that the key is temporary ownership. Buying to sell induces aggressive restructuring since the equilibrium trade sale price increases both because the profits of the acquiring incumbent increase and the...

We propose a model of trade agreements in which contracting is costly, and as a consequence the optimal agreement may be incomplete. Inspite of its simplicity, the model yields rich predictions on the structure of the optimal trade agreement and how this depends on the fundamentals of the...

The paper provides a framework for analysis of remuneration to agents whose task is to make well-informed decisions on behalf of a principal, with managers in large corporations as the most prominent example. The principal and agent initially bargain over the pay scheme to the latter. The...

We study mechanism design under endogenously incomplete commitment as it arises in contracting with escape clauses. An escape clause permits the agent to end a contractual relationship under specified circumstances, after which the principal can offer an ex-post contract. Escape clauses are...

We analyze investment decisions when information is costly, with and without delegation to an agent. We use a rational-inattention model and compare it with a canonical signal-extraction model. We identify three "investment conditions". In "sour" conditions, no information is acquired and no...