Optimal investment with stock repurchase and financing as signals

When management has private information it has an incentiveto finance investment by issuing a security that is overpricedin the market. The market's valuation of the issued securitymay lead management either to forego profitable investmentsor to invest suboptimally. With investment fixed, there existfully revealing signaling equilibria in which the covenantsof the issued claim serve as signals. A straight bond issuecannot provide the signals but a convertible bond issue can.With investment endogenous, fully revealing equilibria existin which the par value of a straight bond issue and the announcedlevel of investment jointly serve as signals and investmentis optimal. The article also investigates the role of a stockrepurchase in these equilibria.     

Capital structure and product market behavior: an examination of plant exit and investment decisions.

We examine whether sharp debt increases through leveraged buyoutsand recapitalizations interact with market structure to influenceplant closing and investment decisions of recapitalizing firmsand their rivals. We take into account the fact that recapitalizationsand investment decisions are both endogenous and may be simultaneouslyinfluenced by the same exogenous events. Following their recapitalizations,firms in industries with high concentration are more likelyto close plants and less likely to invest. Rival firms are lesslikely to close plants and more likely to invest when the marketshare of leveraged firms is higher.     

A theory of the nominal term structure of interest rates

A model of the nominal term structure of interest rates is developedthat has a positive and stationary process for the interestrate and delivers closed form expressions for the prices ofdiscount bonds and European options on bonds. Unlike the one-state-variableversion of the Cox, Ingersoll and Ross (1985) model this model- even in its one-state-variable version - allows the term premiumto change sign as a function of the state and the term to maturity,and also allows for shapes of the yield curve that are observedin the U.S. data but that are disallowed in the Cox, Ingersolland Ross model