The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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DISCUSSION
Published: 07/01/1986 | DOI: 10.1111/j.1540-6261.1986.tb04541.x
JOSEPH WILLIAMS
Perquisites, Risk, and Capital Structure
Published: 03/01/1987 | DOI: 10.1111/j.1540-6261.1987.tb02548.x
JOSEPH WILLIAMS
In a corporate agency problem, perquisites and risk interact to produce novel, complex comparative statics. For example, even if additional debt induces risk‐neutral insiders to increase risk, they never seek to increase the market value of their stock; instead, insiders decrease the present value of their subsequent, conditionally optimal perquisites. Also, the firm's optimal capital structure includes a risky bond with an agreement to remove insiders whenever the bond defaults. However, the optimal sharing rule between corporate claimants cannot be supported solely by standard securities such as bonds, stocks, options, and their hybrids.
DISCUSSION
Published: 07/01/1988 | DOI: 10.1111/j.1540-6261.1988.tb04607.x
JOSEPH WILLIAMS
Efficient Signalling with Dividends, Investment, and Stock Repurchases
Published: 07/01/1988 | DOI: 10.1111/j.1540-6261.1988.tb04605.x
JOSEPH WILLIAMS
The efficient mix of dissipative dividends, investments in real and financial assets, and repurchases of stock is computed for a continuum of firms with inside information about the return on risky real assets. In the efficient signalling equilibrium, the representative firm optimally distributes dividends, invests in risky real assets to maximize net present value, holds no financial securities, and sells new stock in the market. This firm finances its value‐maximizing investment first from internal funds and second from stock sold to new investors.
Dividends, Dilution, and Taxes: A Signalling Equilibrium
Published: 09/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb02363.x
KOSE JOHN, JOSEPH WILLIAMS
A signalling equilibrium with taxable dividends is identified. In this equilibrium, corporate insiders with more valuable private information optimally distribute larger dividends and receive higher prices for their stock whenever the demand for cash by both their firm and its current stockholders exceeds its internal supply of cash. In equilibrium, many firms distribute dividends and simultaneously issue new stock, while other firms pay no dividends. Because dividends reveal all private information not conveyed by corporate audits, current stockholders capture in equilibrium all economic rents net of dissipative signalling costs. Both the announcement effect and the relationship between dividends and cum‐dividend market values are derived explicitly.
Efficient Signalling with Dividends and Investments
Published: 06/01/1987 | DOI: 10.1111/j.1540-6261.1987.tb02570.x
RAMASASTRY AMBARISH, KOSE JOHN, JOSEPH WILLIAMS
An efficient signalling equilibrium with dividends and investments or, equivalently, dividends and net new issues of stock is constructed, and its properties are identified. Because corporate insiders can exploit multiple signals, the efficient mix must minimize dissipative costs. In equilibrium, many firms both distribute dividends and deviate from first‐best investment. Also, the impact of dividends on stock prices is positive. By contrast, the announcement effect of new stock is negative for firms with private information primarily about assets in place and positive for firms with inside information mainly about opportunities to invest.