We develop a dynamic agency model of a public corporation. Managers underinvest because of risk aversion. They smooth rents and payout. They do not exploit interest tax shields fully. The interactions of investment, debt and payout decisions can change drastically depending on managers'...

This review evaluates the four major theories of corporate financing: (1) the Modigliani–Miller theory of capital-structure irrelevance, in which firm values and real investment decisions are unaffected by financing; (2) the trade-off theory, in which firms balance the tax advantages of...

We develop a dynamic agency model where payout, investment and financing decisions are made by managers who attempt to maximize the rents they take from the firm, subject to a capital market constraint. Managers smooth payout in order to smooth their flow of rents. Total payout (dividends plus...

We develop a model of internal governance where the self-serving actions of top management are limited by the potential reaction of subordinates. Internal governance can mitigate agency problems and ensure that firms have substantial value, even with little or no external governance by...

We develop a model of internal governance where the self-serving actions of top management are limited by the potential reaction of subordinates. Internal governance can mitigate agency problems and ensure that firms have substantial value, even with little or no external governance by...

"We develop a model of internal governance where the self-serving actions of top management are limited by the potential reaction of subordinates. Internal governance can mitigate agency problems and ensure that firms have substantial value, even with little or no external governance by...