Finance 866:
Current Issues in Finance
Fall 2008
Professor Eric Powers
epowers@moore.sc.edu
BA 462
777-4928
Overview: One thing that becomes clear whenever doing background review for a new paper is
that the body of research in corporate finance is enormous. We could spend an entire semester
just discussing quality papers on corporate capital structure. That, however, would not make for a
particularly relevant course. My objective is to give you a broad overview of relevant research,
both theoretical and empirical, in what I consider to be some of the major subject areas for
corporate finance. Keep in mind that the subject areas and assigned readings reflect my limited
knowledge of corporate finance. In no way is this a comprehensive review of the literature. It is
merely a jumping off point in your foray into the wonderful world of corporate finance!
Primary Subject Areas:
 Theory of the firm
 Governance:
o Corporate ownership
o Boards of directors
o CEO turnover
 Capital Structure
o Static Capital Structure
o Pecking Order, and Market Timing
o Agency Costs and Capital Structure
o Debt Structure:
 Payout Policy
 Capital Budgeting and Investments.
 Diversification and Internal Capital Markets
 IPOs, SEOs, and security offerings in general
 Financial Distress
 Restructuring
 Law and Finance
Grades/Assignments:
 Referee Reports: You will write three referee reports during the semester. For the
first two, the paper will be given to you. For the third, pick a subject area that
interests you and find a working paper on SSRN that you would like to referee and
verify with me whether it is appropriate. For each of the three reports, write a two to
three page referee report critiquing the analysis, offering suggestions for
improvement, and assessing the placement of the paper in the existing literature.
Your third referee report will be presented in class towards the end of the semester.
 There will be two (I think) small modeling projects
 Final Exam
 Class Participation
Readings: Below are the readings for each major area. For each section, they are broken up into
actual required readings and references. Please read the required readings before the class in
which they are discussed. Note that this schedule is subject to change. The current list of
required readings is long. We will probably pare it down. My recommendation whenever you
read a paper that is of interest is that you immediately write your own one or two page summary
of the paper. I find that if I don't do this, there is no chance of me remembering what I read in the
future.
Theory of the firm:
 Coase, R.H., 1937, The nature of the firm, Economica 16, 386-405.
 Other References:
o Alchian, Armen, and Harold Demsetz, 1972, Production, information costs and
economic organization, American Economic Review 62: 777-795.
o Berle, A, and G. Means, 1932, The modern corporation and private property,
New York: Macmillan.
o Cheung, Steven, 1983, The contractual nature of the firm, Journal of Law and
Economics 26, 1-22.
o Fama, Eugene, 1980, Agency problems and the theory of the firm, Journal of
Political Economy 88, 288-307.
o Fama, Eugene, and Michael Jensen, 1983, Separation of ownership and control,
Journal of Law and Economics, 26, 301-325.
o Demsetz, Harold, 1988, The theory of the firm revisited, Journal of Law,
Economics, and Organization 4, 141-163.
o Grossman, Sanford, and Oliver Hart, 1986, The costs and benefits of ownership:
a theory of vertical and lateral ownership, Journal of Political Economy 94, 691719.
o Grossman, Sanford, and John Moore, 1990, Property rights and the nature of the
firm, Journal of Political Economy 98, 1119-1158.
o Hart, Oliver, 2001, Financial contracting, Journal of Economic Literature 39,
1079-1110.
o Holmstrom, Bengt, and Paul Milgrom, 1994, The firm as an incentive system,
American Economic Review 84, 972-991.
o Holmstrom, Bengt, and John Roberts, 1998, The boundaries of the firm revisted,
Journal of Economic Perspectives 12, 73-94.
o Holmstrom, Bengt, and Jean Tirole, 1989, The theory of the firm, Chapter 2 in R.
Shmalensee and R. Willig (eds.) Handbook of Industrial Organization,
Amsterdam: North Holland.
o Rajan, Rahgurham, and Luigi Zingales, 1998, Power in a theory of the firm,
Quarterly Journal of Economics 113, 387-432.
o Rajan, Raghuram, and Luigi Zingales, 2002, The firm as a dedicated hierarchy: a
theory of the origins and growth of firms.
o Williamson, Oliver, 1979, transaction cost economics: the governance of
contractual relations, Journal of Law and Economics 22, 233-261.
o Zingales, Luigi, 2000, In search of new foundations, Journal of Finance 55,
1623-1653.
Corporate Governance Overview (The top two articles should be read concurrently with the
rest of the governance stuff.)
 Shleifer, Andrei, and Robert Vishny, 1997, A survey of corporate governance,
Journal of Finance 52, 737-783.
 Denis, Diane and John McConnell, 2005, International Corporate governance,
Journal of Financial and Quantitative Analysis, forthcoming.
 Other References:
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Jean Tirole, 2001, Corporate governance, Econometrica 69, 1-35.
Hermalin, Benajmin, Trends in corporate governance, Journal of Finance,
forthcoming.
Bebchuk, Lucian, Alma Cohen, and Allen Ferrel, 2004, What matters in
corporate governance?, Harvard University working paper.
Corporate Governance: Ownership
 Jensen Michael and William Meckling,1976, Theory of the firm: managerial
behaviour, agency costs and capital structure, Journal of Financial Economics 3,
305-360.
 Morck, Randall, Andrei Schleifer, and Robert Vishny, 1988, Management ownership
and market valuation, Journal of Financial Economics.
 Core, John and David Larcker, 2002, Performance consequences of mandatory
increases in executive stock ownership Journal of Financial Economics 64, 317-340.
 English, Philip, Tom Smythe and Christopher McNeil, 2004, The CALPERS Effect
Revisited, Journal of Corporate Finance 10, 157-174.
 Cornett, Marcia, Alan Marcus, Anthony Saunders, and Hassan Tehranian, 2007, The
Impact of Institutional Ownership on Corporate Operating Performance, Journal of
Banking and Finance 31, 1771-1794.
 Rafael La Porta, Florencio Lopez de Silanes, Andrei Schleifer, and Robert W.
Vishny, 1999, Corporate ownership around the world, Journal of Finance 54, 471517.
 Other References:
o Atanasov, Vladimir, 2005, How much value can blockholders tunnel? Evidence
from the Bulgarian mass privatization auctions, Journal of Financial Economics
76, 191-234.
o Burkhart, Mike, Denis Gromb, and Fausto Panunzi, 1997, Large shareholders,
monitoring, and the value of the firm, Quarterly Journal of Economics 112, 693728.
o Bushee, Brian, 2004, Identifying and attracting the “right” investors, evidence on
the behavior of institutional investors, Journal of Applied Corporate Finance 16,
28-35.
o Demsetz, H. and K. Lehn, 1985, The structure of corporate ownership: causes
and consequences, Journal of Political Economy 93., 1155-1178.
o Gillan, Stuart, and Laura Starks, 2000, Corporate Governance Proposals and
Shareholder Activism: The Role of Institutional Investors, Journal of Financial
Economics 57, 275-305.
o Hartzell, Jay, and Laura Starks, 2003, Institutional investors and executive
compensation, Journal of Finance 58, 2351-2375.
o Holderness, Cliff, Randy Kroszner, and Dennis Sheehan, 1999, Were the good
old days that good? Changes in managerial stock ownership since the great
depression, Journal of Finance 54, 435-469.
o Ki C. H., and David Suk, 1998, The effect of ownership structure on firm
performance: Additional evidence, Review of Financial Economics 7, 143-155.
o Maug, Ernst, 1998, Large shareholders as monitors: Is there a tradeoff between
liquidity and control?, Journal of Finance 53, 65-98.
o McConnell, J.J., and Henri Servaes, 1990, Additional evidence on equity
ownership and corporate value, Journal of Financial Economics 27, 595-612.
o Shleifer, Andrei, and Robert Vishny, 1986, Large shareholders and corporate
control, Journal of Political Economy 94, 461-488.
o
Smith, Michael, 1996, Shareholder activism by institutional investors: evidence
from CALPERS, Journal of Finance 52, 227-252.
Corporate Governance: Boards of Directors
 Hermalin, Benjamin, and Michael Weisbach, 1998, Endogenously chosen boards of
directors and their monitoring of the CEO, American Economic Review 88, 96-118.
 Yermack, David, 1996, Higher market valuation of companies with a small board of
directors, Journal of Financial Economics, 40, 185-211.
 Other References:
o Fich, Eliezer, and Anil Shivdasani, 2004, Are busy boards effective monitors?
Drexel University working paper.
o Raheja, Charu G., 2004, Determinants of board size and composition: a theory of
corporate boards, Journal of Financial and Quantitative Analysis, forthcoming.
Corporate Governance: CEO Turnover
 Weisbach, Michael, 1988, Outside directors and CEO turnover, Journal of Financial
Economics.
 Denis, D., Denis, D., Sarin, A., 1997. Ownership structure and top executive
turnover. Journal of Financial Economics 45, 193-221.
 McNeil, Chris, Greg Niehaus, and Eric Powers, 2004, Management Turnover in
Subsidiaries of Conglomerates Versus Stand-Alone Firms, Journal of Financial
Economics 72, 63-96.
 Zajac, Edward J., and James D. Westphal, 1996, Who Shall Succeed? How
CEO/board Preferences and Power Affect the Choice of New CEOs, Academy of
Management Journal 39, 64-91.
 Other References:
o Warner, J., Watts, R., Wruck, K., 1988. Stock prices and top management
changes. Journal of Financial Economics 20, 461-492.
o Denis, D., Kruse, T. 2000. Managerial discipline and corporate restructuring
following performance declines. Journal of Financial Economics, 55, 391-424.
o Dahya, Jay, John J. McConnell, and Nicklaos G. Travlos, 2002, The Cadbury
Committee, Corporate Performance, and Top Management Turnover, Journal of
Finance 57, 461-483.
o Goyal, V.,Park, C., 2002. Board leadership structure and CEO turnover. Journal
of Corporate Finance 8, 49-66.
o Volpin, P., 2002. Governance with poor investor protection: evidence from top
executive turnover in Italy. Journal of Financial Economics 64, 61-90.
Capital Structure: Overview
 Harris, M. and A. Raviv, 1991, The theory of capital structure, Journal of Finance
46, 297-335.
 Ragurham Rajan, and Luigi Zingales, 1995, What do we know about capital
structure? Some evidence from international data, Journal of Finance 50, 1421-1460.
 Graham, John, and Campbell Harvey, 2001, The theory and practice of corporate
finance: evidence from the field, Journal of Financial Economics, 60, 187-243.
Capital Structure: Static Capital Structure:
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Modigliani, Franco, and Merton Miller, 1958, The cost of capital, corporation finance
and the theory of investment, American Economic Review 48, 261-297.
Modigliani, Franco, and Merton Miller, 1963, Corporate income taxes and the cost of
capital: a correction, American Economic Review 53, 433-443.
Miller, Merton H., 1977, Debt and taxes, Journal of Finance 32, 261-275.
Myers, Stewart C., 1977, Determinants of corporate borrowing, Journal of Financial
Economics 5, 147-175.
Mackie-Mason, Jeffrey, 1990, Do taxes affect corporate financing decisions? Journal
of Finance 45, 1471-1493.
Graham, John R., 2000, How big are the tax benefits of debt?, Journal of Finance 55,
1901-1941.
Molina, Carlos, 2005, Are firms underleveraged?, an examination of the effect of
leverage on default probabilities, Journal of Finance, forthcoming.
Other References:
o Stiglitz, Joseph, 1969, A re-examination of the Modigliani-Miller Theorem,
American Economic Review 59, 784-793.
o Joseph E. Stiglitz, 1974, On the irrelevance of corporate financial policy,
American Economic Review 64, 851-866.
o DeAngelo, Harry, and Ronald Masulis, 1980, Optimal capital structure under
corporate and personal taxation, Journal of Financial Economics 8, 3-29.
o Fama, Eugene, and Kenneth French, 1998, Taxes, financing decisions, and firm
value, Journal of Finance 53, 819-843.
Capital Structure: Asymmetric Information, the Pecking Order, and Market Timing:
 Stewart C. Myers, and Nicholas S. Majluf, 1984, Corporate financing and
investment decisions when firms have information that investors do not have,
Journal of Financial Economics 13, 187-221.
 Myers, Stewart, 1984, The capital structure puzzle, Journal of Finance 39, 575592.
 Shyam-Sunder, Lakshmi, and Stewart Myers, 1999, Testing static tradeoff
against pecking order models of capital structure, Journal of Financial
Economics 51, 219-244.
 Baker, Malcolm, and Jeffrey Wurgler, 2002, Market timing and capital structure,
Journal of Finance 57, 1-32.
 Kayhan, Ayla and Sheridan Titman, 2005, Firms’ histories and their capital
structures, Journal of Financial Economics forthcoming.
 Laura Liu, 2005, Do Firms Have Target Leverage Ratios? Evidence from
Historical Market-to-Book and Past Returns, Hong Kong University of Science
and Technology working paper.
 Other References:
o Ross, Steven, 1977, The determinants of financial structure: the incentive
signalling approach, Bell Journal of Economics 8, 23-40.
o Frank, Murray, and Vidhan Goyal, 2003, Testing the pecking order theory of
capital structure, Journal of Financial Economics 67, 217-248.
o Lemmon, Michael, and Jaime Zender, 2004, Debt capacity and tests of
capital structure theories, University of Utah working paper.
o Huang, Rongbing, and Jay Ritter, 2004, Testing the market timing theory of
capital structure, University of Florida working paper.
Capital Structure: Agency Costs:
 Stultz, Rene, 1990, Managerial discretion and optimal financing policies, Journal of
Financial Economics, 3-27.
 Zweibel, Jeffery, 1996, Dynamic capital structure under managerial entrenchment,
American Economic Review 86, 1197-1215.
Capital Structure: Debt Structure:
 Diamond, Douglas, 1991, Debt maturity structure and liquidity risk, Quarterly
Journal of Economics 106, 709-737.
 Rajan, Raghuram, 1992, Insiders and outsiders: the choice between informed and
arm's length debt, Journal of Finance 47, 1367-1400.
 Diamond, Douglas, 1993, Seniority and maturity of debt contracts, Journal of
Financial Economics, 341-368.
 Rajan, Raghuram, and Mitchell Petersen, 1994, The Benefits of Lender
Relationships: Evidence from Small Business Data, Journal of Finance 49, 3-37.
 Rajan, Raghuram, and Mitchell Petersen, 1995, The Effect of Credit Market
Competition on Lending Relationships, Quarterly Journal of Economics 110, 407444.
 Other References:
o Bergloff, Erik, and Ernst-Ludwig von Thadden, 1994, Short term versus long
term interests, capital structure with multiple investors, Quarterly Journal of
Economics, 439, 1055-1084.
o Winton, Andrew, 1995, Costly state verification and multiple investors: the role
of seniority, Review of Financial Studies 8, 91-123.
o Bolton, Patrick, and David Scharfstein, 1996, Optimal debt structure with
multiple creditors, Journal of Political Economy 104, 1-25.
o Welch, Ivo, 1997, "Why is Bank Debt Senior? A Theory of Priority Based on
Influence Costs." The Review of Financial Studies 10-4, 1203-1236.
Payout Policy:
 Miller, Merton, and Kevin Rock, 1985, Dividend policy under asymmetric
information, Journal of Finance 40, 1031-1051.
 La Porta, Rafael, F. Lopez de Silanes, Andrei Shleifer, and Robert Vishny, 2000,
Agency problems and dividend policy around the world, Journal of Finance 55, 1-33.
 Allen, Franklin, and Roni Michaely, 2002, Payout policy, University of Pennsylvania
working paper.
 Brav, Alon, John Graham, Campbell Harvey, and Roni Michaely, 2004, Payout
policy in the 21st century, Duke University working paper.
 Other References:
o Lintner, J., 1956, Distributions of incomes of corporations among dividends,
retained earnings, and taxes, American Economic Review 46, 97-113.
o Miller, Merton, and Myron Scholes, 1978, Dividends and taxes, Journal of
Financial Economics 6, 333-364.
o Easterbrook, F., 1984, Two agency cost explanations of dividends, American
Economic Review, 650-659.
o Healy, Paul, and Krishna Palepu, 1988, Earnings information conveyed by
dividend initiations and omissions, Journal of Financial Economics, 149-175.
o Allen, Franklin; Bernardo, Antonio; and Ivo Welch. 2000, A Theory of
Dividends Based on Tax Clienteles." The Journal of Finance 55-6, 2499-2536.
o
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Jagannathan, Murali, Clifford Stephens, and Michael Weisbach, 2000, Financial
flexibility and the choice between dividends and stock repurchases, Journal of
Financial Economics 57, 355-384.
Fama, Eugene, and Ken French, 2001, Disappearing dividends: changing firm
characteristics or increasing reluctance to pay? Journal of Financial Economics
60, 3-43.
Capital Budgeting and Investments.
 Fazzari, Steven, Glenn Hubbard, and Mitchell Petersen, 1988, Financing constraints
and corporate investment, Brookings Papers on Economics Activity 141-195.
 Hoshi, Kashyap, and Scharfstein, 1991, Corporate Structure, Liquidity, and
Investment: Evidence from Japanese Industrial Groups, Quarterly Journal of
Economics
 Rauh, Joshua, 2006, Investment and Financing Constraints: Evidence from the
Funding of Corporate Pension Plans, Journal of Finance, forthcoming.
 Other References:
o Stein, Jeremy, 1989, Efficient capital markets, inefficient firms: a model of
myopic corporate behavior, Quarterly Journal of Economics 104, 655-669.
o Scharfstein, David, and Jeremy Stein, 1990, Herd behavior and investment,
American Economic Review.
o Bebchuk, Lucian, and Lars Stole, 1993, Do short-term objectives lead to under or
over-investment?, Journal of Finance 48, 719-729.
o Harris, Milton, and Artur Raviv, 1996, The capital budgeting process, incentives
and information, Journal of Finance
o Lang, Larry, Eli Ofek, and Rene Stulz, 1996, Leverage, investment, and firm
growth, Journal of Financial Economics 40, 3-30.
o Hubbard, Glenn, 1998, Capital market imperfections and investment, Journal of
Economic Literature 36, 193-225.
o Stein, Jeremy, 2002, Agency, information and corporate investment, Handbook
of the Economics of Finance, George Constantinides, Milton Harris, and Rene
Stulz editors, Amsterdam: North-Holland.
Diversification and Internal Capital Markets
 Berger, Philip, and Eli Ofek, 1995, Diversification's effect on firm value, Journal of
Financial Economics 3, 39-66.
 Lamont, Owen, 1997, Cash flow and investment: evidence from internal capital
markets, Journal of Finance 52, 83-109.
 Gertner, Robert, Eric Powers, and David Scharfstein, 2002, Learning About Internal
Capital Markets from Corporate Spin-offs, Journal of Finance 57, 2479-2506.
 Other References:
o Lang, Larry, and Rene Stulz, Tobins Q, 1994, Corporate diversification and firm
performance, Journal of Political Economy
o Stein, Jeremy, 1997, Internal capital markets and the competition for corporate
resources, Journal of Finance 52, 111-133.
o Stein, Jeremy, and David Scharfstein, 1998, The dark side of internal capital
markets: divisional rent-seeking and inefficient investment, Journal of Finance
53, 2537-2564.
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IPOs
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SEOs
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Rajan, Ragurham, Henri Servaes, and Luigi Zingales, 2000, The cost of diversity:
the diversification discount and inefficient investment, Journal of Finance
Maksimovic, Vojicslav, and Gordon Phillips, 2002, Do conglomerate firms
allocate resources efficiently across industries? Theory and evidence, Journal of
Finance 57, 721-767.
Kevin Rock, 1986, Why new issues are underpriced, Journal of Financial Economics
15, 187-212.
Jay Ritter, 1987, The costs of going public, Journal of Financial Economics, 19, 269281.
Jay Ritter, 1991, The long-run performance of initial public offerings, Journal of
Finance 46, 3-27.
Loughran, Timothy, and Jay Ritter, 1995, The new issues puzzle, Journal of Finance
50, 23-51.
Teoh, Siew-Hong, Ivo Welch, and T.J. Wong, 1998, Earnings Management and The
Long-Run Market Performance of Initial Public Offerings." The Journal of Finance
53-6, 1935-1974.
Other References:
o Asquith, Paul, and David Mullins, 1986, Equity issues and offering dilution,
Journal of Financial Economics 15, 61-89.
o Allen, Franklin, and Gary Faulhaber, 1989, Signaling by underpricing in the IPO
market, Journal of Financial Economics 23, 303-323.
o Benveniste, Lawrence, and Paul Spindt, 1989, How investment bankers
determine the offer price and allocation of new issues, Journal of Financial
Economics 24, 343-361.
o Welch, Ivo, 1992, Sequential sales, learning and cascades, Journal of Finance
47, 695-732.
o Chen, Hsuan-Chi, and Jay Ritter, 2000, The seven percent solution, Journal of
Finance 55, 1105-1131.
o Ritter, Jay and Ivo Welch., 2002, A Review of IPO Activity, Pricing and
Allocations." Journal of Finance 57-4, 1795-1828.
Spiess, K. and J. Affleck-Graves, 1995, Underperformance in long run stock returns
following seasoned equity offering, Journal of Financial Economics 38, 243-267.
Bayless, M. and S. Chaplinsky, 1996, Is there a window of opportunity for seasoned
equity issuance?, Journal of Finance 51, 253-278.
Teoh, S., I. Welch, and T. Wong, 1998, Earnings management and the
underperformance in seasoned equity offerings, Journal of Financial Economics 50,
63-99.
Eberhart, Allan, Akhtar Siddique, 2002, The Long-Term Performance of Corporate
Bonds (and Stocks) Following Seasoned Equity Offerings, Review of Financial
Studies 15, 5, 1385-1406.
Other References:
o Masulis, R. and A. Korwar, 1986, Seasoned equity offerings: an empirical
investigation, Journal of Financial Economics 15, 91-118.
o Loughran, T. and J. Ritter, 1997, The operating performance of firms conducting
seasoned equity offerings, Journal of Finance 52, 1823-1850.
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Clarke, Jonathan, Craig Dunbar, and Kathleen Kahle, 2001, Long-Run
Performance and Insider Trading in Completed and Canceled Seasoned Equity
Offerings, Journal of Financial and Quantitative Analysis 36, 4, 415-30
Corwin, Shane, 2003, The Determinants of Underpricing for Seasoned Equity
Offers, Journal of Finance 58, 5, 2249-79
Gibson, Scott, , Assem Safieddine, and Ramana Sonti, 2004, Smart Investments
by Smart Money: Evidence from Seasoned Equity Offerings, Journal of
Financial Economics, 72, 3, 581-604
Financial Distress
 Asquith, Paul, Robert Gertner, and David Scharfstein, 1993, Anatomy of financial
distress, an examination of junk-bond issuers, Quarterly Journal of Economics 109,
625-658.
 Pulvino, Todd, 1998, Do asset fire-sales exist? An empirical investigation of
commercial aircraft transactions, Journal of Finance
 Andrade, Gregor. and Steven Kaplan, 1998, How costly is financial (not economic)
distress? Evidence from highly levered transactions that became distressed, Journal
of Finance 53, 1443-1493.
 Other References:
o Cutler & Summers, 1988, The costs of conflict resolution and financial distress:
evidence from the Texaco-Pennzoil litigation, Rand Journal of Economics 29,
157-172.
o Gilson, Stuart, Kose John, and Larry Lang, 1990, Troubled debt restructurings:
an empirical study of private reorganization of firms in default, Journal of
Financial Economics 27, 315-353.
o Gertner, Robert, and David Scharfstein, 1991, A theory of workouts and the
effect of reorganization law, Journal of Finance 48, 1189-1221.
o Shleifer, Andrei, and Robert Vishny, 1992, Liquidation value and debt capacity:
a market equilibrium approach, Journal of Finance
o Brown, David, Chris James, and Robert Mooradian, 1994, Asset sales by
financially distressed firms, Journal of Corporate Finance
Restructuring:
 Slovin, Myron B., Marie Sushka, and Steven Ferraro, 1995, A Comparison of the
Information Conveyed by Equity Carve-outs, Spin-offs, and Asset Sell-offs, Journal
of Financial Economics, 37, 1, 89-104
 Daley, Lane, Vikas Mehrotra, Vikas, and Ranjini Sivakumar, 1997, Corporate Focus
and Value Creation: Evidence from Spinoffs, Journal of Financial Economics 45, 2,
257-81.
 Vijh, Anand, 2002, The Positive Announcement-Period Returns of Equity Carveouts:
Asymmetric Information or Divestiture Gains?, Journal of Business 75, 1, 153-90.
 Lamont, Owen A, and Richard Thaler, 2003, Can the Market Add and Subtract?
Mispricing in Tech Stock Carve-Outs, Journal of Political Economy 111, 2, 227-68.
 Other References:
o Cusatis, Patrick J., James Miles, Randall Woolridge, 1993, Restructuring through
Spinoffs: The Stock Market Evidence, Journal of Financial Economics 33, 3,
293-311
o Desai, Hemang, and Prem Jain, 1999, Firm Performance and Focus: Long-Run
Stock Market Performance Following Spinoffs, Journal of Financial Economics
54, 1, 75-101.
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Vijh, Anand 1999, Long-Term Returns from Equity Carveouts, Journal of
Financial Economics 51, 2, 273-308.
Schlingemann, Frederik, Rene Stulz, and Ralph Walkling, 2002, Divestitures and
the Liquidity of the Market for Corporate Assets, Journal of Financial
Economics, 64, 1, 117-44.
Powers, Eric A. 2003, Deciphering the Motives for Equity Carve-Outs,
Journal of Financial Research 26 1, 31-50.
Mergers and Acquisitions
 Grossman, Sandy, and Oliver Hart, 1980, Takeover bids, the free rider problem, and
the theory of the corporation, Bell Journal of Economics.
 Jarrel, G., J. Brickley, and J. Netter, 1988, The market for corporate control: the
empirical evidence since 1980, Journal of Economic Perspectives
 Schlingemann, Frederik, 2004, Financing Decisions and Bidder Gains, Journal of
Corporate Finance 10, 5, 683-701.
Law and Finance
 Laporta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert Vishny,
1997, Legal determinants of external finance, Journal of Finance 52, 1131-1150.
 Laporta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert Vishny,
2000, Investor protection and corporate governance, Journal of Financial Economics
58, 3-28.
 Laporta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert Vishny,
2000, Investor protection and corporate valuation, Journal of Finance 57, 1147-1170.
 Doidge, Craig, Andrew Karolyi, and Rene Stulz, 2004, Why do countries matter so
much for corporate governance?, University of Toronto working paper.
 Other References:
o Demirguc-Kunt, Asli, and Vojislav Maksimovic, 1997, Law, Finance, and Firm
Growth, Journal of Finance 53, 2107-2137.
o Johnson, Simon, Rafael La Porta, Florencio Lopez de Silanes, and Andrei
Schleifer, 2000, Tunneling, American Economic Review, 90, 22-27.
o Pistor, Katharina, Martin Raiser, and Stanislaw Gelfer, 2000, Law and finance in
transition economies, Economics of Transition 8, 325-368.
o Tadesse, Solomon, 2002, Financial Architecture and economic performance:
international evidence, University of South Carolina working paper.
Behavioural Finance:
 Kahneman, Daniel, and Amos Tversky, 1979, Prospect theory: an analysis of
decision making under risk, Econometrica 47, 263-291.
 Barberis, Nicholas, and Richard Thaler, 2003, A survey of behavioral finance, in
Handbook of the Economics of Finance Constantinides, Harris, and Stulz editors,
North-Holland.
Empirical Issues Associated with Corporate Finance

Brown and Warner, 1980, Using daily stock returns: The case of event
studies. Journal of Financial Economics 8. 205-258.