Why do investors keep buying underperforming mutual funds? To address this issue, we develop a one-period principal-agent model with a representative investor and a fund manager in an asymmetric information framework. This model shows that the investors perception of the fund plays the key role...

A cash-rich company is less likely to be a bidder during 1994-2008 in the US, contrasting the findings based on earlier sample period. This is mainly due to the companies with high residual market-to-book ratios (i.e. the residual of the actual market-to-book ratio regressed on measures of...