We develop a multi-asset trading model to examine the closed-end fund discount. The model shows that the discount can arise if the quality of private information in the underlying assets is sufficiently better than in the fund. The model also indicates that a discount (premium) can arise if the...

Contrary to the implications of many payout theories, we find that announcements of open-market share repurchase programs are not followed by an increase in operating performance. However, we find that the systematic risk and the cost of capital of these firms decline after these events....

Firms that increase (decrease) dividends experience a significant decline (increase) in their systematic risk. The dividend-increasing firms do not increase their capital expenditure and experience a decline in profitability in the years after the dividend change. The positive market reaction to...

This paper provides evidence that the positive relation between firm-level stock returns and firm-level return volatility is due to real options that firms possess. Consistent with the theoretical prediction that the value of a real option should be increasing in the volatility of the underlying...

We show that repurchases have not only became an important form of payout for U.S. corporations, but also that firms finance their share repurchases with funds that otherwise would have been used to increase dividends. We find that young firms have a higher propensity to pay cash through...

Capital expenditures by the top 100 firms make up more than 60% of aggregate investment by publicly traded firms, and explain most of the variation in aggregate net fixed private non-residential investment. Surprisingly, these firms have the highest investment-cash flow sensitivity in the...

Recent research provides empirical evidence that investors’ tendency to think in non-proportional terms not only drives a significant fraction of stock return volatility, but also subsumes the well-documented size–volatility relation. After carefully addressing critical inference and...

This paper provides causal evidence of the effects of the M&A market on target firms' corporate policies. Using antitrust regulatory thresholds to link the probability of a takeover to the size of the firm, we find evidence that firms intentionally reduce their size to elicit a takeover bid....