https://www.sfu.ca/~wainwrig/Econ400/jensen-meckling.pdf

Theory of the firm: Managerial behavior, agency costs and ownership structure

计量经济分析 = Econometric analysis

Managerial discretion and optimal financing policies

This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem. The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. — Adam Smith (1776)

Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure

https://teach.business.uq.edu.au/courses/FINM6900/files/module-2/readings/BreedenJFE.pdf

An intertemporal asset pricing model with stochastic consumption and investment opportunities

Market imperfections, capital market equilibrium and corporation finance

https://pages.stern.nyu.edu/~msubrahm/papers/Liquidity%20Crisis%20July%202009.pdf

Illiquidity or credit deterioration: A study of liquidity in the US corporate bond market during financial crises☆

In this article, we present a new method for pricing and hedging American options along with an efficient implementation procedure. The proposed method is efficient and accurate in computing both option values and various option hedge parameters. We demonstrate the computational accuracy and efficiency of this numerical procedure in relation to other competing approaches. We also suggest how the method can be applied to the case of any American option for which a closed-form solution exists for the corresponding European option. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

/pdf/pricing-and-hedging-american-options-a-recursive-integration-4fdjbbsarf.pdf

Pricing and Hedging American Options: A Recursive Integration Method

We investigate whether liquidity is an important price factor in the US corporate bond market. In particular, we focus on whether liquidity eects are more pronounced in periods of nancial crises, especially for bonds with high credit risk, using a unique data set covering more than 20,000 bonds, between October 2004 and December 2008. We employ a wide range of liquidity measures and nd that liquidity eects account for approximately 14% of the explained market-wide corporate yield spread changes. We conclude that the economic impact of the liquidity measures is signicantly larger in periods of crisis, and for speculative grade bonds.

Illiquidity or credit deterioration: A study of liquidity in the UScorporate bond market during

In this paper we study the determinants of business groups' ownership structure using unique panel data on Korean chaebols. In particular, we attempt to understand how pyramids form over time. We find that chaebols grow vertically (that is, pyramidally) as the family uses well-established group firms ("central firms'') to set up and acquire younger firms that have low profitability and high capital requirements. Chaebols grow horizontally (that is, using direct family ownership) when the family acquires firms that are highly profitable and require less capital. Our evidence suggests that the (previously documented) lower profitability of pyramidal firms is partly due to a selection effect (e.g., the family optimally places low profitability firms in pyramids). To show this, we examine instances of large changes in the ownership structure of group firms. Specifically, we find that poor past performance predicts an increase in the degree of pyramiding in a firm's ownership structure. Most compellingly, we find that the profitability of new group firms in the year before they are added to the group predicts whether they are added to pyramids or controlled directly by the family. We also examine the relative valuation of chaebol firms. We find that the group's central firms trade at a discount relative to other public group firms possibly due to the selection of low-profitability, high capital intensity firms into pyramids. Our results shed light on the process by which pyramids form, and provide new evidence on the performance and valuation of business group firms.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1928178_code49859.pdf?abstractid=1354500&rulid=135586&mirid=2

Marti G. Subrahmanyam

Papers

Market imperfections, capital market equilibrium and corporation finance

Illiquidity or credit deterioration: A study of liquidity in the US corporate bond market during financial crises☆

Pricing and Hedging American Options: A Recursive Integration Method

Illiquidity or credit deterioration: A study of liquidity in the UScorporate bond market during

The Structure and Formation of Business Groups: Evidence from Korean Chaebols