This paper considers a setting in which managers have private information about the values of their firms and can communicate it to uninformed investors through the use of two signals: capital structure and inventory accounting method. We show conditions under which a separating equilibrium with...

On February 9,1982, Hammermill Paper registered with the Securities and Exchange Commission to swap as many as 400,000 common shares for $13.4 million of the company's 8.07% promissory notes due February 1, 1997. The resulting swap increased Hammermill's 1st quarter earnings by $3.7 million,...

We explain the puzzling empirical evidence on the investory accounting choice through a management signaling argument. We assert that firms with lower nominal production costs than other firms have relatively less to gain from the tax advantages assocaited with LIFO adoption. For these firms,...

We address the following questions concerning bank capital: why are banks so highly levered, what are the consequences of this leverage for the economy as a whole, and how can robust capital regulation be designed to restrict bank leverage to levels that do not generate excessive systemic risk?...

We consider a model in which banks face two moral hazard problems: 1) asset substitution by shareholders, which can occur when banks make socially-inefficient, risky loans; and 2) managerial under-provision of effort in loan monitoring. The privately-optimal level of bank leverage is neither too...

This book, written entirely by faculty at the Olin Business School, Washington University in St. Louis, provides a variety of practical and implementable perspectives on innovation for managers. In addition, the book contains chapters that provide reviews of the academic research on innovation...

Regulators and markets can find the balance sheets of large financial institutions difficult to penetrate, and they are mindful of how undercapitalization can create incentives to take on excessive risk. This study proposes a novel framework for capital regulation that addresses banks'...