This paper documents average acquisition discounts for stand-alone private firms and subsidiaries of other firms (unlisted targets) of 15% to 30% relative to acquisition multiples for comparable publicly traded targets. My results are strongly consistent with the notion that sale prices for unlisted targets are affected by both the need for, and availability of, the liquidity provided by the buyer. Corporate parents are significantly liquidity-constrained prior to the sale of a subsidiary, particularly when the subsidiary is being sold for cash. Furthermore, acquisition discounts are significantly greater when debt capital is relatively more expensive to obtain, and when the parent firm has below-market stock returns in the 12 months prior to the sale.

While standard real options models assume that agents possess a constant rate of time preference, there is substantial evidence that agents are impatient about choices in the short term but are patient when choosing between long-term alternatives. We extend the real options framework to model the investment-timing decisions of entrepreneurs with time-inconsistent preferences. The impact on investment-timing depends on such factors as whether entrepreneurs are sophisticated or naive in their expectations regarding their future time-inconsistent behavior, and whether the payoff from investment occurs all at once or over time. The model is extended to the case of a competitive equilibrium.

Prior work suggests that if a firm shares a larger proportion of its growth opportunities with rivals, an inability to fully invest in these opportunities leads to predatory behavior on the part of rivals and losses in market share. We examine whether firms manage this predation risk. We find inter- and intra-industry evidence that the extent of the interdependence of a firm's investment opportunities with rivals is positively associated with its use of derivatives and the size of its cash holdings. Moreover, an analysis of investment behavior provides evidence that if this interdependence is high, the management of predation risk provides strategic benefits. Our results indicate that predation risk is an important determinant of corporate financial policy choices and investment behavior.

US manufacturing firms incorporated in states with stronger payout restrictions use less debt, while antitakeover statutes do not significantly reduce long-run leverage. Correcting for the endogenously determined choice of where to incorporate, we find that firms sort themselves according to state laws and capital structure needs. After accounting for self-selection, state antitakeover laws are positively associated with debt as a fraction of market value, possibly due to lower market values for these firms. Payout restrictions appear to reduce leverage for firms that have not reincorporated outside their home states. These constraints explain part of the negative relation between profitability and leverage.

We investigate cross-country determinants of private credit, using new data on legal creditor rights and private and public credit registries in 129 countries. Both creditor protection through the legal system and information-sharing institutions are associated with higher ratios of private credit to gross domestic product, but the former is relatively more important in the richer countries. An analysis of legal reforms shows that credit rises after improvements in creditor rights and in information sharing. Creditor rights are remarkably stable over time, contrary to the hypothesis that legal rules are converging. Finally, legal origins are an important determinant of both creditor rights and information-sharing institutions. The analysis suggests that public credit registries, which are primarily a feature of French civil law countries, benefit private credit markets in developing countries.