When planning to raise new equity capital listed firms in Germany almost always buy insurance against the risk of failure by signing an underwriting agreement with a bank, even in case of rights offerings. We calculate the fair price for this insurance and for the rights which can be considered...

We study the link between underpricing of initial public offerings (IPOs) and index excess returns in secondary markets. We use a theoretical model to argue that underpricing of IPOs raises investors’ attention and, thereby, triggers investments in secondary markets. Our theoretical model...

A supervisory board might be seen as an advantageous element of corporate governance. Whether supervision of management is actually beneficial is analyzed under the assumption that the supervisor is not immune to misjudgment as a monitor or may not be a good consultant. The benefits of having...

The Berger and Ofek (1995) excess value measure, comparing a conglomerate’s actual market value to an imputed value based on standalones, has become the standard method to determine value effects of diversification. In this paper, we address a significant bias in this procedure stemming from...

In this paper we aim to verify the existence of costs of financial distress (cfd) for a sample of German CDAX firms using an ex-post approach originally due to Opler/Titman (1994). In contrast to this US-based study we do not find a significant interaction between high leverage and distress for...

type="main" <p>In 2008 the German government enacted a measure designed to curb excessive leverage in LBOs by limiting tax-deductible interest to 30% of EBITDA. And in the U.S., legislators are currently reviewing several regulatory measures, including limits on tax-deductible interest, that are...</p>

We study the certification role of fairness opinions in corporate transactions in a simple non-cooperative setting with asymmetric information and possibly misaligned managerial incentives, and discuss the effect of different regulatory scenarios. Specifically, we compare three settings: one in...

This paper examines the equilibrium effect of a shift in the capital income tax rate upon state prices, risk-neutral probabilities, and corresponding security prices in a single-period binomial model economy with an exogenous risk-free rate. The policy design under consideration consists of a...

We are interested in the effect of capital income taxes upon security prices when investors face locally segmented stock markets and a global bond market. Therefore, we analyze an equilibrium model of an economy with binomial uncertainty, an exogenous risk-free interest rate, and a...