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A Theory of Dividends Based on Tax Clienteles
This paper offers a novel explanation for why some firms prefer to pay dividends rather than repurchase shares. It is well-known that institutional investors are relatively less taxed than individualExpand
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Gain, Loss, and Asset Pricing
We develop an approach to asset pricing in incomplete markets that bridges the gap between the two fundamental approaches in finance: model‐based pricing and pricing by no arbitrage. We strengthenExpand
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On the Evolution of Overconfidence and Entrepreneurs
This paper explains why seemingly irrational overconfident behavior can persist. Information aggregation is poor in groups in which most individuals herd. By ignoring the herd, the actions ofExpand
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Liquidity and Financial Market Runs
We model a run on a financial market, in which each risk-neutral investor fears having to liquidate shares after a run, but before prices can recover back to fundamental values. To avoid having toExpand
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Resources, real options, and corporate strategy
The types of investments a firm undertakes will depend in part on what it expects the outcome of those investments to reveal about its skills, capabilities, and assets (i.e., its resources). WeExpand
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Capital Budgeting and Compensation with Asymmetric Information and Moral Hazard
We consider optimal capital allocation and managerial compensation mechanisms for decentralized firms when division managers have an incentive to misrepresent project quality and to minimizeExpand
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A Theory of Legal Presumptions
This paper develops a theoretical account of presumptions, focusing on their capacity to mediate between costly litigation and ex ante incentives. We augment a standard moral hazard model with aExpand
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Growth Options, Beta, and the Cost of Capital
We show how to decompose a firm's beta into its beta of assets-in-place and its beta of growth opportunities. Our empirical results demonstrate that the beta of growth opportunities is greater thanExpand
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Asset market equilibrium with general tastes, returns, and informational asymmetries
Abstract This paper develops a general computational approach for solving rational expectations equilibrium in asset markets with asymmetric information. Our approach can be applied to models withExpand
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Capital Budgeting in Multi-Division Firms: Information, Agency, and Incentives
We consider a firm with two investment projects (divisions) each run by a manager who can provide (i) (unverifiable) information about the quality of either or both projects and (ii) (unverifiable)Expand
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