We show that executives in the Chinese listed firms make politically motivated investments to build political ties. We also find that excessive investments are more pronounced in firms that can benefit more from political connections (e.g., private firms and poorly governed firms). Although such...

This paper proposes a simple homogeneous dynamic model of investment and corporate risk management for a financially constrained firm. Following Froot, Scharfstein, and Stein (1993), we define a corporation's risk management as the coordination of investment and financing decisions. In our...

Since debt is typically riskier in recessions, transfers from equity holders to debt holders associated with each investment also tend to concentrate in recessions. Such systematic risk exposure of debt overhang has important implications for the investment and financing decisions of firms and...

The 2008 financial crisis exemplifies significant uncertainties in corporate financing conditions. We develop a unified dynamic q-theoretic framework where firms have both a precautionary-savings motive and a market-timing motive for external financing and payout decisions, induced by stochastic...