[In a model of the firm in which insiders are privately informed of the firm's prospects and investment is endogenous, this article shows the existence of coarse dividend-signaling equilibria: Dividends partition the space of possible prospects of the firm, and changes in dividends reflect "broad," or nonincremental, changes in these prospects. These equilibria are shown to exist under general preference and technology structures, and it is argued that they closely match the following "anomalous" empirical features of corporate dividend payouts: Dividend changes have nontrivial information effects, yet dividends are smoothed (in a world with cyclic prospects), and dividends are poor predictors of future earnings. Furthermore, in performing comparative statics, this article derives cross-sectional and time-series restrictions on the relation of dividend smoothing to observable firm attributes.]

[We theoretically and empirically address the endogeneity of corporate ownership structure and the cost of debt, with a novel emphasis on the role of control concentration in post-default firm restructuring. Control concentration raises agency costs of debt, and dominant shareholders trade off private benefits of control against higher borrowing costs in choosing their ownership stakes. Based on our theoretical predictions, and using an international sample of syndicated loans and unique dynamic ownership structure data, we present new evidence on the firm- and macro-level determinants of corporate control concentration and the cost of debt.]

[Recent corporate governance reforms focus on the board's independence and encourage equity ownership by directors. We analyze the efficacy of these reforms in a model in which both adverse selection and moral hazard exist at the level of the firm's management. Delegating governance to the board improves monitoring but creates another agency problem because directors themselves avoid effort and are dependent on the CEO. We show that as directors become less dependent on the CEO, their monitoring efficiency may decrease even as they improve the incentive efficiency of executive compensation contracts. Therefore, a board composed of directors that are more independent may actually perform worse. Moreover, higher equity incentives for the board may increase equity-based compensation awards to management.]

[Based on an analysis of the agency risk for bondholders from managerial entrenchment and fraud, we derive and test refutable hypotheses about the influence of managerial agency risk on bond covenants, using a comprehensive database of corporate bonds from the 1993-2007 period. Managerial entrenchment and the risk of managerial fraud significantly influence the use of covenants, in the direction predicted by the agencytheoretic framework. Our analysis highlights the varied effects of entrenchment on different types of agency risks faced by bondholders: Entrenched managers aggravate investment risk, but ameliorate risk from shareholder opportunism. Covenant use also responds efficiently to the quality of information available regarding the risk of managerial fraud.]

In a model of the firm in which insiders are privately informed of the firm's prospects and investment is endogenous, this article shows the existence of coarse dividend-signaling equilibria: Dividends partition the space of possible prospects of the firm, and changes in dividends reflect "broad", or nonincremental, changes in these prospects. These equilibria are shown to exist under general preference and technology structures, and it is argued that they closely match the following "anomalous" empirical features of corporate dividend payouts: Dividend changes have nontrivial information effects, yet dividends are smoothed (in a world with cyclic prospects), and dividends are poor predictors of future earnings. Furthermore, in performing comparative statics, this article derives cross-sectional and time-series restrictions on the relation of dividend smoothing to observable firm attributes.

This paper investigates the susceptibility of futures markets to price manipulation in a two-period model with asymmetric information and "cash settlement" futures contracts. Without "physical delivery," strategies based on "corners" or "squeezes" are infeasible. However, uninformed investors still earn positive expected profits by establishing a futures position and then trading in the spot market to manipulate the spot price used to compute the cash settlement at delivery. The authors also show that as the number of manipulators grows, profits from manipulation fall to zero. However, even in the limit, manipulation still has a nontrivial impact on market liquidity. More broadly, they interpret manipulation as a form of endogenous "noise trading" which can arise in multiperiod security markets.

We examine information aggregation regarding industry capital productivity from privately informed managers in a dynamic model with optimal incentive contracts. Information cascades always occur if managers enjoy limited liability: when beliefs regarding productivity become endogenously extreme (optimistic or pessimistic), learning stops. There is no learning if initial beliefs are extreme, or if agency conflicts are severe. In contrast to the literature, cascades occur even when signals have unbounded precision or when there are rich action spaces. Relaxing limited liability constraints is not sufficient to avoid cascades; we provide sufficient conditions for efficient information aggregation through incentive contracts.

Using a unique data set with detailed information on the derivative positions of upstream oil and gas firms during 1996–2008, we find that hedging intensity is positively related to factors that amplify chief executive officer (CEO) entrenchment and free cash flow agency costs. There is also robust evidence that hedging is motivated by the reduction of financial distress and borrowing costs, and that it is influenced by both intrinsic cash flow risk and temporary spikes in commodity price volatility. We present a comprehensive perspective on the determinants of corporate hedging, and the results are consistent with the predictions of the risk management and agency costs literatures.

Building on the managerial entrenchment literature, we develop and test a novel perspective on payout policy that integrates the influence of internal governance mechanisms, investment opportunities, management compensation, and monitoring by large shareholders. Our study incorporates both dividend payments and share repurchases, and examines the determinants of the likelihood and the level of payouts. Our model performs well in both in-sample and out-of-sample predictions on a sample of 2,081 firms during 1992–2000. We find that both the likelihood and the level of payouts are significantly and positively (negatively) related to factors that increase (decrease) executive entrenchment levels, even when controlling for size, leverage, and the proportion of tangible to total assets. We identify factors that significantly affect the likelihood but not the level of payouts (or vice versa), and show that entrenchment has an asymmetric influence on dividend vs. shares repurchase policy.

Using a dynamic model of strategic bargaining between equity and debt holders following default, we analyze the impact of shareholder bargaining power and debt overhang on optimal investment and strategic default. Our empirical tests utilize a new measure of the debt overhang wedge based on default probabilities generated from a hazard model for bankruptcy. Consistent with the theoretical predictions, bondholder (shareholder) ownership concentration ceteris paribus enhances (weakens) the overhang wedge and dampens (increases) capital investment. We identify novel ownership-structure-related factors in firm-level capital investment and document how post-default shareholder bargaining power alleviates the underinvestment problem caused by debt overhang. Received March 26, 2018; editorial decision June 20, 2018 by Editor: Paolo Fulghieri. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.