We analyze the merits of delaying profitable investments, where such delays allow for more internal funding and keeping a higher stake in the firm. We show a selfreinforcing mechanism where entrepreneurial firms with better investment opportunities also invest sooner. Despite hoarding less cash, such firms might, nevertheless, have high cash holdings when they mature. Furthermore, we show that ...

We investigate whether foreign ownership shields firms from liquidity constraints following a financial crisis. Recent crises in East Asia, Latin America, and Russia have been characterized both by large currency devaluations and widespread collapse of the banking sector. Although a currency devaluation should increase exporters’ competitiveness and investment, a collapsing banking system may d...

Abstract Since the early 1980s, composition of US public firms has progressively shifted toward less profitable with high growth potential (Fama and French, 2004). We estimate a dynamic corporate finance model to quantify role this selection mechanism for secular trend in cash holdings among firms. find that an increase precautionary savings motive—primarily driven by decline initial profitabil...

IPOs affiliated to business groups represent a large fraction of new issues in global markets. Groups are characterized by stronger private benefits control and an internal funding advantage. Consistent with these features, group firms more selective when going public than standalone firms. In particular, larger older engage less market timing IPOs. Group invest profitable post IPO. Private als...

The current analysis introduces human capital investments which – as all other investment projects – must be carried out given ex-ante uncertain returns. This return uncertainty reflects that particular ex-post ability realizations may or may not induce the possibility to engage in profitable entrepreneurial activity. Managed firms which recruit randomly while offering a certain wage-income can...

A merger of two Cournot firms, who produce spatially differentiated products and engage in spatial price discrimination, creates a firm that is in some sense larger than its rivals. Nevertheless, we show that the merged firm is unable to translate this larger size into profit-increasing behavior unless the difference in the costs of the merging firms at the affected consumer locations is "suffi...

Price discrimination is generally thought to improve firm profits by allowing firms to extract more consumer surplus. In competition, however, price discrimination may also be costly to the firm because restrictive incentive compatibility conditions may allow the competing firm to gain market share at the discriminating firm’s expense. Therefore, with asymmetric competition, it may be the case ...

This paper considers on-demand services and its impact on market structure, firm profitability and consumer welfare. The unique properties of on-demand services are the conversion of fixed costs to variable costs, removal of capacity constraint and fast setup time (which enables quick entry by any firm at any time when there is opportunity), while privacy and security concerns and switching cos...