This paper studies hidden arbitrage opportunities in markets where large traders affect the price process, and where the market is complete (in the classical sense). The arbitrage opportunities are “hidden” because they occur on a small set of times (typically of Lebesgue measure zero). These arbitrage opportunities occur naturally in markets where a large trader supports the price of some asse...

This appendix contains tables and figures that supplement the analysis in the paper. Section A presents the asset pricing test results with equity issuance cost shocks constructed using alternative definitions of equity issuance. Section B presents the asset pricing test results with equity issuance cost shocks constructed by taking averages of portfolio-level equity issuance shocks across port...

Foreign IPO firms incur higher issuance costs than domestic firms due to greater information asymmetry and ex ante valuation uncertainty. Little is known about how to overcome such liability of foreignness. This study, based on foreign-listed Chinese firms, shows that pre-IPO financing relationship with investors from the country of listing can effectively mitigate cross-border information fric...

Like other nascent and emerging markets, China’s stock markets are highly imperfect, reflecting inadequate disclosure, ineffectual regulatory supervision, opaque corporate governance and legal framework, ownership restrictions, weak shareholder protection, etc. Reflecting the wide-spread perception, Chinese stock markets are often depicted as something like “casinos driven by fast money flows i...

In this paper, we demonstrate the advantage of the use of broad-based stock option plans over cash compensation when the …rm needs to …nance both current and future investment in an environment where external …nance is costly. Intuitively, the company obtains funds for investment in the current period by cutting …xed wages through the issuance of stock options. The company receives additional f...