In this paper we introduce flexibility as an economic concept and apply it to the firm's security issuance decision and capital structure choice. Flexibility is the ability to make decisions that one thinks are best even when others disagree. The firm's management values flexibility because it...

We develop an economic theory of quot;flexibilityquot;, which we interpret as the discretion or ability to make a decision that others disagree with. We show that flexibility is essentially an option for the decisionmaker, and can be valued as such. The value of the flexibility option is...

In organizations, it is often necessary to engage in costly delegation of ideas; such delegation seeks to efficiently aggregate multiple information signals. What this paper shows is that those who delegate often find it impossible to separate the evaluation of the ideas they delegate from the...

This paper examines the distortionary phenomena which occur when agents within the firm react to the organizational reality that the evaluation of the ideas that they analyze is often inseparable from the evaluation of their own ability. The commingling of the assessment of the business issue...

This paper provides an explanation for the urge of banks to merge and expand scope. We build a model where bank activities evolve over time. Due to deregulation and technological advances, new opportunities become available, but the skill needed to exploit them effectively may be unknown. Early...

In this paper we analyze an entrepreneur/manager's choice between private and public ownership in a setting in which management needs some quot;elbow roomquot; or autonomy to optimally manage the firm. In public capital markets, the corporate governance regime in place exposes the firm to...

We analyze a publicly-traded firm's decision to stay public or go private, focusing on the stochastic nature of investor participation in the public market. The liquidity of public ownership is both a blessing and a curse: it facilitates trading and lowers the cost of capital, but it also...

We analyze a publicly-traded firm's decision to stay public or go private, focusing on the stochastic nature of investor participation in the public market. The liquidity of public ownership is both a blessing and a curse: it facilitates trading and lowers the cost of capital, but it also...

This paper proposes a new framework for understanding financial intermediation. In contrast to previous research, we consider a setting in which intermediaries possess no inherent information processing or monitoring advantages. Instead, in an economy with overly optimistic entrepreneurs who...

In this paper we ask: what kind of information and how much of it should firms voluntarily disclose? Three types of disclosures are considered. One is information that complements the information available only to informed investors (to-be-processed complementary information). The second is...