We develop a dynamic model of corporate investment and financing decisions in which corporate insiders have superior information about the firm's growth prospects. We show that firms with positive private information can credibly signal their type to outside investors using the timing of...

We use a dynamic model of cash management in which firms face competitive pressure to show that competition increases corporate cash holdings as well as the frequency and size of equity issues. In our model, these effects are driven by small, financially constrained firms, in contrast with the...

This paper presents a simple framework for the analysis, valuation and simulation of several real options in the presence of shadow costs of incomplete information. Information costs can be viewed as sunk costs in the spirit of Merton's (1987) model of capital market equilibrium with incomplete...

We analyze whether the diversification discount is driven by the book value bias of corporate debt. Book values of debt may be a more downward biased proxy of the market value of debt for diversified firms, relative to undiversified firms, as diversification leads to lower firm risk. Thus,...

A large body of literature demonstrates that acquisitions are on average value-destroying for the acquirer. We investigate whether the change in the acquirer's information uncertainty contributes to acquirer wealth losses. Information uncertainty affects the discount rate (the cost of capital),...

This paper examines the hypothesis that, during merger waves, a bidder's actions are informative for other bidders and the market. I develop a real options model to explore the interplay between acquisition timing and the market reaction to these events in the context of merger waves. The model...

We consider the investment timing and financing decisions of financially constrained small and medium-sized enterprises (SMEs) in a dynamic setting with asymmetric information. To alleviate its financing constraints, an SME finances a risky project using equity-for-guarantee swaps (EGS), which...