Capital structure theories typically assume liquidation values are exogenous even though they may be determined in part by the debt choices of firms in the industry (Shleifer and Vishny, 1992; Pulvino, 1998). We develop a model in which high industry debt leads to a greater supply of assets for sale...

Considering that roughly 75 percent of new businesses fail within the first five years, it is difficult to account for entrepreneurs' irrationally overconfident behavior.One explanation is that overconfident entrepreneurs are less likely to imitate their peers and more likely to explore their...

We analyze incentive-efficient government bailouts within a canonical model of intra-firm moral hazard. Bailouts exacerbate the moral hazard of firms and managers in two ways. First, they make them less averse to failing. Second, the taxes to fund bailouts dampen their incentives. Nevertheless,...