This paper studies the interplay between the operational and financial facets of capacity investment. We consider the capacity choice problem of a firm with limited liquidity and whose access to external capital markets is hampered by moral hazard. The firm must therefore not only calibrate its...

We develop a model of financially constrained arbitrage, and use it to study the dynamics of arbitrage capital, liquidity, and asset prices. Arbitrageurs exploit price discrepancies between assets traded in segmented markets, and in doing so provide liquidity to investors. A collateral...

We study the role of legal investor protection for the efficiency of the market for corporate control. Stronger legal investor protection limits the ease with which an acquirer, once in control, can extract private benefits at the expense of non-controlling investors. This, in turn, increases...

We survey theoretical developments in the literature on the limits of arbitrage. This literature investigates how costs faced by arbitrageurs can prevent them from eliminating mispricings and providing liquidity to other investors. Research in this area is currently evolving into a broader...

Bernhardt, Koufopoulos, and Trigilia's (2019) note is set as a critique of our paper, Donaldson, Gromb, and Piacentino (2018). However, none of their results or arguments contradicts (or even alters) any of ours

This paper compares the financing of new ventures in start-ups (entrepreneurship) and in established firms (intrapreneurship). Intrapreneurship allows established firms to use information on failed intrapreneurs to redeploy them into other jobs. By contrast, failed entrepreneurs must seek other...