Corporate Finance.

• Position: Bureau News

The NBER's Program on Corp orate Finance met in Chicago on April 11. Program Director Raghuram Rajan and Per Stromberg, both of NBER and University of Chicago, organized this program:

Ulf Axelson, University of Chicago, "Security Design with Investor Private Information"

Discussant: Philip Bond, Northwestern University

Evan Gatev and Philip E. Strahan, Boston College, "Banks' Advantage in Fledging Liquidity Risk: Theory and Evidence from the Commercial Paper Market"

Discussant: Jeremy C. Stein, NBER and Harvard University

Steven N. Kaplan, NBER and University of Chicago, and Antoinette Schoar, NBER and MIT, "Private Equity Returns: Persistence and Capital Flows"

Discussant: Alexander Ljunqvist, New York University

Atif Mian, University of Chicago, "Incentives, Supervision, and Organizational Hieracrhy: A Loan-Level Investigation of Banking"

Discussant: Paola Sapienza, Northwestern University

Rafael La Porta and Andrei Shleifer, NBER and Harvard University, and Florencio Lopez-de-Silanes, NBER and Yale University, "What Works in Securities Laws?"

Discussant: Doug Baird, University of Chicago

Roman Inderst, London School of Economics, and Holger M. Muller, New York University, "The Effect of Capital Market Characteristics on the Value of Start-Up Firms"

Discussant: Stewart C. Myers, NBER and MIT

Marianne P. Bitler, RAND Corporation; Tobias J. Moskowitz, NBER and University of Chicago;. and Annette Vissing-Jorgensen, NBER and Northwestern University, "Why Do Entrepreneurs Hold Large Ownership Shares? Testing Agency Theory Using Entrepreneur Effort and Wealth"

Discussant: Dirk Jenter, MIT

Axelson argues that an important friction in the issuance of financial securities is the fact that potential investors may be privately informed about the value of the underlying assets. He shows how security design can help to overcome this friction. In the single asset case, debt is often an optimal security when the number of potential investors is small, but equity becomes optimal as the degree of competition increases. In the multiple asset case, debt backed by a pool of assets is optimal if the number of assets is large relative to the degree of competition, but equity backed by individual assets is optimal when the number of assets is small relative to the degree of competition. Axelson uses the theory to interpret security design choices in financial markets.

Gatev and Strahan argue that banks have a unique ability to hedge against market-wide...