This paper investigates the relation between stock liquidity and firm performance. We find that firms with liquid stocks have better firm performance as measured by the market-to-book ratio. This result holds even when we include industry or firm fixed effects, control for idiosyncratic risk,...

This paper considers optimal compensation for a CEO who is entrusted with administering corporate assets honestly. Optimal compensation designs maximize integrity at minimum cost. These designs are very ‘low powered,’ i.e., while specifying a lower bound for performance and...

Securities trading has generated some of the most sensational scandals in the popular business press. In one of the most publicized cases of insider trading, in the late 1980s Michael R. Milken and Ivan F. Boesky were sentenced to stiff prison terms and payment of enormous damage assessments and...

This paper embeds security design in a model of evolutionary learning. We consider a competitive and perfect financial market where agents, as in Allen and Gale (1988), have heterogeneous valuations for cash flows. Our point of departure is that, instead of assuming that agents are endowed with...

This paper models, and experimentally simulates, the free-rider problem in a takeover when the raider has the option to “resolicit,” that is, to make a new offer after an offer has been rejected. In theory, the option to resolicit, by lowering offer credibility, increases the dissipative...