I hypothesize that risk taking is greater in stock thrifts than in mutual thrifts because the residual and fixed claims are separable. I find that stock thrifts exhibit greater profit variability during the 1982–1988 period and that conversions from mutual to stock ownership are associated with increased investment in risky assets and increased profit variability. These findings illustrate the relation between the structure of residual claims, incentives, and firm performance as well as the unintended consequences resulting from changes in thrift regulations.

I analyze the investment and funding strategies of two thrifts, one stock owned and one mutually owned, from 1983 to 1988. Despite their similarities prior to 1983, the stock thrift implemented a riskier financial strategy and did so only after converting to stock ownership. Although this strategy ultimately led to its failure, the stock thrift still made significant payouts to its controlling shareholders. This case study illustrates in stark terms the relation between organizational form and risk shifting in the thrift industry.

Unlike operating company IPOs, Real Estate Investment Trust (REIT) IPOs in the 1970s and 1980s were initially overpriced and subsequently underperformed other REIT securities in the 100 trading days after initial issuance. In contrast. equity REIT IPOs in the 1990s have been underpriced. on average by 3.6%. and have moderately outperformed seasoned equity REITs in the 100 trading days after issuance. We attribute the initial-day underpricing of recent REIT IPOs to greater valuation uncertainty and greater institutional involvement in the recent REIT IPO market. Both of these factors make these issues more susceptible to the ‘winner's curse’.