We analyze how the availability of internal funds affects a firm's investment in the presence of capital market imperfections. Using a model that endogenizes the cost of external funds and allows for negative levels of internal funds, we show that under otherwise standard assumptions, investment...

Firms sometimes commit fraud by altering publicly reported information to be more favorable, and investors can monitor firms to obtain more accurate information. We study equilibrium fraud and monitoring decisions. Fraud is most likely to occur in relatively good times, and the link between...

Target firms are often faced with bidders that are not equally well informed. This reduces the competition between the bidders, since a less well informed bidder fears the winner's curse more. We analyze how a target should optimally be sold in the presence of asymmetric bidders. We show that a...

Target firms often face bidders that are not equally well informed, which reduces competition, because bidders with less information fear the winner's curse more. We analyze how targets should be sold in this situation. We show that a sequential procedure can extract the highest possible...

We study financial contracting when both an entrepreneur's investment and the resulting revenue are unobservable to an outside investor. The optimal contract must induce the entrepreneur both to choose a particular investment and to repay the investor; what complicates the problem is that once...

We study financial contracting when both an entrepreneur's investment and the resulting revenue are unobservable to an outside investor. We show that a debt contract is always optimal; repayment is induced by a liquidation threat that increases with the extent of default. Moreover, when the...

Firms sometimes commit fraud by altering publicly reported information to be more favorable, and investors can monitor firms to obtain more accurate information. We study equilibrium fraud and monitoring decisions. Fraud is most likely to occur in relatively good times, and the link between...

When bankrupt firms are sold, they are often repurchased by their former owner or manager. These insiders are by default better informed than outsiders about the true value of the firm or its assets, so other potential buyers must worry about overpaying if they win. The presence of insiders may...

Stapled Finance is a loan commitment arranged by a seller in an Mamp;A setting. The key feature is that whoever wins the bidding contest has the option (not the obligation) to accept the loan commitment. Stapled finance has become common: in 2004, it was offered in 39% of US deals that involved...

Stapled Finance is a loan commitment arranged by a seller in an Mamp;A setting. The key feature is that whoever wins the bidding contest has the option (not the obligation) to accept the loan commitment. Stapled finance has become common: in 2004, it was offered in 39% of US deals that involved...