The authors document abnormal trading profits in Dutch auction self-tenders. Tender period profits–buying after announcement and selling just before expiration–are 1.74 percent. Buying just before expiration and tendering yields abnormal profits of 1.36 percent. Total profits from buying just after announcement and tendering remain positive after adjusting for bid-ask spreads. Trading profits are higher for smaller firms and positively correlated with tender period unsystematic risk, suggesting that they arise due to the pricing of event risk.

[There is little evidence in the literature on the relative importance of the underlying sources of merger gains. Prior literature suggests that synergies could arise due to taxes, market power, or efficiency improvements. Based on Value Line forecasts, we estimate the average synergy gains in a broad sample of 264 large mergers to be 10.03% of the combined equity value of the merging firms. The detailed data in Value Line projections allow for the decomposition of these gains into underlying operating and financial synergies. We estimate that tax savings contribute only 1.64% in additional value, while operating synergies account for the remaining 8.38%. Operating synergies are higher in focused mergers, while tax savings constitute a large fraction of the gains in diversifying mergers. The operating synergies are generated primarily by cutbacks in investment expenditures rather than by increased operating profits. Overall, the evidence suggests that mergers generate gains by improving resource allocation rather than by reducing tax payments or increasing the market power of the combined firm.]

Previous research documents positive ex‐dividend day returns in excess of one percent in the unique institutional setting of Hong Kong, where neither dividends nor capital gains are taxed. Short‐term arbitrage trades around the ex‐day were hampered by physical settlement procedures. After the recent switch to an electronic settlement system, which enables such trades, ex‐day abnormal returns have declined to an insignificant 0.17 percent. This drop is more pronounced for high‐yield stocks, which are more likely to attract dividend capture trading. The evidence points to the crucial role of short‐term traders in ensuring the pricing efficiency of financial markets.

We study ex-dividend returns in Mexico, where an imputation system entitles individual investors to a net dividend tax credit. Based on taxation, we expect ex-day abnormal returns to be negative or at most zero in Mexico. However, they are significantly positive. Because ex-day returns are positive even for stocks restricted to Mexican nationals, they are not attributable to foreign stockholders’ tax considerations. None of the market microstructure-based hypothesis in the literature can explain these positive ex-day returns. Ex-day returns in Mexico are a puzzle.

We document abnormal trading profits in Dutch auction self-tenders. Tender period profits buying after announcement and selling just before expiration are 1.74 percent (Bhagat, Brickley, and Lowenstein (1987) report similar profits for interfirm tenders). Buying just before expiration and tendering yields abnormal profits of 1.36 percent (Lakonishok and Vermaelen (1990) report 9 percent for fixed-price self-tenders using a filter rule). Total profits from buying just after announcement and tendering remain positive after adjusting for bid-ask spreads. Trading profits are higher for smaller firms, and positively correlated with tender period unsystematic risk, suggesting that they arise due to the pricing of event risk.

We document abnormal trading profits in Dutch auction self‐tenders. Tender period profits—buying after announcement and selling just before expiration—are 1.74 percent ( Bhagat, Brickley, and Lowenstein (1987) report similar profits for interfirm tenders). Buying just before expiration and tendering yields abnormal profits of 1.36 percent ( Lakonishok and Vermaelen (1990) report 9 percent for fixed‐price self‐tenders using a filter rule). Total profits from buying just after announcement and tendering remain positive after adjusting for bid‐ask spreads. Trading profits are higher for smaller firms, and positively correlated with tender period unsystematic risk, suggesting that they arise due to the pricing of event risk.

We study how financial distress of a significant customer impacts capital structure of suppliers. Using a sample of U.S. firms that filed for Chapter 11 between 1980 and 2013, we find that the suppliers of these firms increase their leverage ratio over the two years prior to the filing date. This change is economically significant and consistent with the bargaining power theory, which states that an increase in suppliers' debt decreases the surplus available for negotiations. Therefore, suppliers increase their financing leverage to fortify their bargaining power with significant, distressed customers. We also find evidence that suppliers reduce their leverage after the customer reorganizes its liabilities and capital structure in the Chapter 11 process, indicating a return to a previous status quo.

We show how the structure of partner incentives and decision processes within a venture capital firm contribute to fund performance and partnership success. Optimal capital allocation during staged financing requires that partner incentives encourage cooperation by linking a partner's compensation to the return on the entire fund rather than return on the investment sponsored by an individual partner. Incentives for individual performance are optimally provisioned by a higher profit share in a subsequent fund. Our paper provides an economic underpinning to empirical observations about partner pay and the internal organization of venture capital firms.

Prior research documents that suppliers with higher sales concentration have lower leverage ratios, consistent with lenders’ heightened concerns about a large customer switching suppliers. We study whether a supplier's binding ties to its significant customers help mitigate these concerns. We assess the supplier-customer bond using the age of the relationship and the presence of professional network links between directors and officers of the two firms. We find evidence that binding ties boost suppliers’ leverage ratios suggesting that they reassure lenders about the stability of the supplier's operations. We also find that the effect of relationship age is more relevant for suppliers that operate in more competitive industries and have low levels of relationship specific investments, thus exposing them to higher switching risks.