Firms comprise divisions that often differ with respect to the degree of asset tangibility. As the strength of borrowing constraints depends on the liquidation value of assets, these firms influence their debt capacity by allocating funds across divisions. We argue that a company whose capital...

This study examines how accounting quality relates to firm-level capital investment efficiency. Our first hypothesis is that higher quality accounting enhances investment efficiency by reducing information asymmetry between managers and outside suppliers of capital. Our second hypothesis is that...

This paper provides a rational explanation for earnings discontinuity in the context of the agency model. A company manager often possesses private information about the project's expected return. This information is valuable to the firm because early warning that a project is unlikely to...

Prior evidence that higher quality financial reporting improves capital investment efficiency leaves unaddressed whether it reduces over- or under-investment. This study provides evidence of both in documenting a conditional negative (positive) association between financial reporting quality and...

This paper studies how industry peers respond when another firm in the industry is the subject of a hostile takeover attempt. We document two major responses. First, the industry peers cut their capital spending, free cash flows, and cash holdings, and increase their leverage and payouts to...

The increase in the importance of intangibles in business competitiveness has made investment selection more challenging to investors that, under high information asymmetry, tend to charge higher premiums to provide capital or simply deny it. Private Equity and Venture Capital (PE/VC)...

Investment decisions frequently require coordination across multiple divisions of a firm. This paper explores a class of capital budgeting mechanisms in which the divisions issue reports regarding the anticipated profitability of proposed projects. To hold the divisions accountable for their...

We consider a sequential delegation setting where a firm delegates an investment decision and, subsequently, a sales decision to a privately informed manager. For both these decisions, corporate income taxes have real effects. We show that compensating the manager based on pre-tax residual...

I investigate how the use and voluntary disclosure of synthetic leases is affected by incentives to defer cash outflows and keep debt off the balance sheet. I find that managers of cash-constrained firms with incentives to defer cash payments are more likely to finance asset purchases with...

This paper has been revised into one subsequent SSRN working paper and another paper in progress.Popular press has argued that firms holding cash should be regarded highly by investors because firms will access good prospects. This view contradicts with the Jensen (1986) free cash flow...