We present an overlapping generations model with spatial separation and agents who face liquidity risk to investigate the widely held belief that financial intermediaries exist because they save on transaction costs. We find that if agents only use a pure exchange mechanism, they engage in...

We examine performance in publicly listed U.K. companies over a period that encompasses the issuance of the Cadbury Committee's Code of Best Practice, which calls for the abolition of the combined CEO/COB position. We find that companies splitting the combined CEO/COB position to conform to the...

An endless leverage certificate (ELC) is a novel retail structured product that gives its holder the right to claim the difference between the value of an underlying security and an interest accruing financing level. An ELC ceases to exist if the underlying breaches a contractual knockout level,...

We analyze an overlapping generations economy where agents interact to share liquidity risk. We show that a pure exchange economy has excessive trade in equilibrium because agents interact to rebalance their portfolios. Intergenerational financial intermediaries reduce the number of interactions...

In this paper we investigate under what conditions financial intermediaries can improve welfare through intergenerational risk sharing. We review the constraints suggested by the extant literature and propose a new limitation on intergenerational risk sharing: We argue that an intermediary's...

In this paper I claim that public-going owner-managers do not know the true value of their firms. The price that the stock-market sets for the firm's shares after the IPO is a better estimate for the true firm-value than the prior that management had before the offering. Because a higher...