This study examines how political and economic factors affect the offer price, share allocation, and other terms governments choose when they privatize state-owned enterprises via a public share offering. Using a 59 country sample of 630 share issue privatizations (SIPs) with total proceeds of over $446 billion during the period 1977–1997, we find that governments consistently underprice SIP offers, tilt their share allocation patterns to favour domestic investors, impose control restrictions on privatized firms, and typically use fixed-price offers rather than book building or competitive tender offers, all to further political and economic policy objectives.

This paper provides evidence on a previously unidentified source of managerial incentives: concerns about post-retirement board service. Both the likelihood that a retired CEO serves on his own board two years after departure, as well as the likelihood of serving as an outside director on other boards, are positively and strongly related to his performance while CEO. Retention on the CEO's own board depends primarily on stock returns, while service on outside boards is better explained by accounting returns. The evidence also suggests that firms consider ability in choosing board members.

We examine the importance of stockholder–bondholder conflicts in capital-structure choice. Numerical techniques are used to compute the expected wealth transfer between stockholders and bondholders when a firm adopts a new project. We characterize the set of positive NPV projects that stockholders prefer to ignore and the set of negative NPV projects that stockholders want to accept. The results illustrate how these distortions vary with firm and project characteristics. We also estimate the impact of stockholder–bondholder conflicts on investment decisions for 23 different firms and examine the extent to which stockholder-bondholder conflicts explain observed cross-sectional variation in capital structures.