Internal capital markets (ICMs) provide firms an alternative to costly external financing; however, they also provide an avenue to avoid the monitoring associated with issuing external capital. We argue that firms operating inefficient internal capital markets will avoid outside financing....

We provide new evidence on the monitoring benefits from institutional ownership by analyzing the impact of institutional ownership on stock price and operating performance following seasoned equity offerings, a setting where the effects of monitoring are likely to be especially important. We...

This paper examines the role of buyer–supplier relationships on suppliers' financial constraints. Buyers are non-financial stakeholders with both the ability and incentive to monitor their supplier and act as a certifying agent. This mitigates agency costs, reducing the wedge between the costs...

When a firm has external debt and monitoring by shareholders is essential, managerial bonuses are shown to be an optimal solution. A small managerial bonus linked to firm's performance not only reduces moral hazard between managers and shareholders, but also between creditors and monitoring...

This paper is about the corporate structure, the organizational structure, and the financial structure of firms, and how they relate to each other. We show that separation of ownership and control may arise as a response to overload costs, although it involves agency costs, and that...