We test several hypotheses on how takeover premium is related to investors’ divergence of opinion on the target’s equity value. We show that the total takeover premium, the pre-announcement target stock price runup and the post-announcement stock price markup are all higher when investors...

This paper shows that illiquid growth opportunities crucially impact the agency costs of risky debt. If the value of these growth opportunities is sufficiently high, they reverse riskshifting incentives into risk-avoidance incentives, creating a new agency cost of debt. They can also eliminate...

This paper shows that illiquid growth opportunities crucially impact the agency costs of risky debt. If the value of these growth opportunities is sufficiently high, they reverse risk shifting incentives into risk-avoidance incentives, creating a new agency cost of debt. They can also eliminate...

This paper attempts to link the agency literature (concerned with the fact that tensions between bondholders and shareholders may trigger suboptimal investment decisions) with the one dealing with temporal resolution of uncertainty (TRU). We consider here how the speed of resolution of the...

This paper examines the incentive structure underlying the current features of bank regulation, particularly the role of prompt corrective action, capital requirements and mandatory restrictions on asset choice as primary tools to control risk-shifting incentives of depository institutions. We...

Recent empirical work has documented the tendency of corporations to reset strike prices on previously-awarded executive stock option grants when declining stock prices have pushed these options out-of-the-money. This practice has been criticized as counter-productive since it weakens incentives...

This paper examines the incentive structure underlying the current features of bank regulation, particularly the role of prompt corrective action, capital requirements and mandatory restrictions on asset choice as primary tools to control risk-shifting incentives of depository institutions. We...

This paper surveys the empirical and theoretical literature on the mechanisms of corporate governance. We focus on the internat mechanisms of corporate governance (e.g., arising from conflicts of interests between managers and equityholders, equityholders and creditors, and capital contributors...

This paper examines the incentive structure underlying the current features of bank regulation. We show that capital regulation has limited effectiveness, given the observed high leverage ratios of banks. We propose instead a more direct and effective mechanism of influencing incentives through...

This paper investigates the design of privatization mechanisms in emerging market economies. We identify an emerging market economy by the political constraints that limit the set of viable privatization mechanisms. Our objective is to explain the striking diversity of privatization mechanisms...