We study the effect of investor horizons on a comprehensive set of corporate decisions. Longterm investors have the means and motive to monitor corporate managers, which generates corporate decisions that are consistent with shareholder value maximization. We find that longterm investors strengthen corporate governance and restrain managerial misbehaviors such as earnings management and financi...

I study the causes and consequences of staging in the setting of private investments in public equities (PIPEs). I find that, in PIPE investments, as in venture capital staging, the staging strategy is used by investors as a monitoring mechanism to mitigate information asymmetry and agency problems. Moreover, strategic investors and investors investing alone are more likely to utilize staging. ...

This paper develops a model of weight assignments using a pseudo-Bayesian approach that reflects investors’ behavioral biases. In this parsimonious model of investor sentiment, weights induced by investors’ conservative and representative heuristics are assigned to observations of the earning shocks of stock prices. Such weight assignments enable us to provide a quantitative link between some m...

Asian initial public offerings (IPOs) require investors to pay subscription funds upfront upon submission of applications, and these funds are locked-up for one to three weeks without interest. Hence, the IPO process entails an explicit financing cost (opportunity cost) whether investors borrow funds or use their own funds to apply for IPO shares. The IPO subscription costs are not trivial, esp...

Harmonisation of accounting standards has been an important process in response to globalisation of capital markets. “The globalisation of capital markets and the developments in telecommunications and the internet bring new significance to the need for comparable and transparent financial reporting and require new thinking by companies, investors, creditors and auditors about what financial in...

This article explains the high level and the countercyclical variation of the equity premium in a consumption-based asset pricing model with low large-scale risk aversion. Investors have gain-loss utility over consumption relative to slowly time-varying habit. Stocks deliver low returns in recessions when consumption falls below habit; investors therefore require a high premium for holding stoc...

Mean-variance criterion has long been the main stream approach in the optimal portfolio theory. The investors try to make a balance between the risk and return on their portfolio. In this paper, the deviation of the asset return from the investor’s expectation in the worst scenario is taken as the measure of risk for portfolio selection. One important advantage of this approach is that the inve...

We investigate the dynamics of prices, information and expectations in a competitive, noisy, dynamic asset pricing equilibrium model with long-term investors. We argue that the fact that prices can score worse or better than consensus opinion in predicting the fundamentals is a product of endogenous short-term speculation. For a given, positive level of residual payoff uncertainty, if noise tra...

We analyze a competitive model in which different information signals get reflected in value at different points in time. If investors are sufficiently risk averse, we obtain an equilibrium in which all investors focus exclusively on the short term. In addition, we show that increasing the variance of informationless trading increases market depth but causes a greater proportion of investors to...

This paper studies the wealth and pricing implications of loss aversion in the presence of arbitrageurs with Epstein-Zin preferences. Our analysis shows that if loss aversion is the only difference in investors’ preferences, then for empirically relevant parameter values, loss-averse investors will be driven out of the market and do not affect long run prices. The selection process is slow in t...