Using the quarterly Compustat files, we present empirical findings that business capital investment is significantly higher in the fourth quarter than in other quarters. Even after controlling for business capital investment determinants, we find that the fourth quarter capital investment is significantly larger but less sensitive to investment opportunities than other quarters' capital investment. This phenomenon is more evident for firms with larger cash holdings than for firms with smaller cash holdings, for larger firms than for smaller firms, and for diversified firms than for stand-alone firms. Our findings suggest a high level of agency costs in corporate investment decisions.

Stock flippers pose a problem for underwriters of initial public offerings (IPOs). They subscribe to the issue, but immediately resell their shares, which may depress the aftermarket price. This paper presents a model of how stock flippers affect IPO pricing. The model shows that the underwriter chooses whether to price the issue as a cold, weak, or hot IPO. Stock flippers have the greatest effect on pricing in weak IPOs and provide an explanation for underwriter stabilization. In contrast to existing models of stabilization, the underwriter gains from after-market purchases, particularly if the contract with the issuer includes an over-allotment option. The over-allotment option encourages a lower offer price, which may lead to under-pricing. These results correspond to recent findings on IPO returns and underwriter stabilization activities.

This article investigates investor activism when there are a number of strategic investors that are capable of intervening in corporate governance. These strategic investors can monitor and/or trade in anonymous financial markets. In equilibrium, a core group of monitoring investors emerges endogenously to curtail managerial opportunism. These core activists both intervene and trade aggressively. Although the smallest investors are passive, there is no monotonic relationship between the size of preexisting shareholdings and activism. In fact, among those investors who choose activism, those with the smallest holdings are the most aggressive.

This article studies information blockages and the asymmetric release of information in a security market with fixed setup costs of trading. In this setting, "sidelined" investors may delay trading until price movements validate their private signals. Trading thereby internally generates the arrival of further news to the market. This leads to (1) negative skewness following price run-ups and positive skewness following price rundowns (even though the model is ex ante symmetric), (2) a lack of correspondence between large price changes and the arrival of external information, and (3) increases in volatility following large price changes.

We report a gift exchange experiment. Firms make wage offers; workers respond by determining an effort level. Higher effort is more costly to workers, and firms have no mechanism for punishing or rewarding workers. Consistent with the gift exchange hypothesis, workers provide more effort at higher wages, but undergraduates provide substantially less effort than MBAs. Evidence suggests this results from differences in prior work experience. Firms' nonbinding effort requests are at least partially honored, resulting in increased overall effort for undergraduates. Although higher wages are relatively more costly for lower productivity firms, workers do not provide them with more effort.

We examine the effect of bargaining power and informational asymmetry on the design of international cooperative ventures in the presence of restrictions on equity participation and investment. When the bargaining advantage rests with the multinational, equity participation restrictions can increase the profits to domestic firms and encourage sub-optimal investment policies. Overinvestment occurs when the multinational's bargaining advantage is reinforced by an informational advantage, while underinvestment occurs when the domestic firm possesses the informational advantage. In contrast, when the bargaining advantage rests with the domestic firm, equity participation restrictions do not affect investment levels.