The retirement savings system in the U.S. has proven to be highly successful, with participation and retirement assets both rising steadily over time. The introduction of new products, the increase in contribution limits, the improvement in financial literacy, and the introduction of automatic enrollment and automatic escalation features have all contributed to this success. These strong features of our retirement system must be reinforced to build the retirement savings base to ensure adequate replacement rates of income for retirees.

STEM fields lead to innovation and economic growth. More than 6.6 million STEM jobs need to be filled by 2022, outpacing non-STEM job growth by 6%. In order to fully reach that potential and for the U.S. economy to continue to be competitive, women are needed in both STEM fields of study and professions.

We examine the role of angel investors in early venture financing using a unique sample of 182 Series A preferred stock rounds. Our sample includes deals in which angels invest alone, VCs invest alone, and where both investor types co-invest. We find that deals with more angel investors have weaker cash flow and control rights, and experience longer times to resolution. Among larger deals, those financed by VCs alone are most likely to experience successful liquidation. Our overall results support the conclusion that angel objectives likely align more with entrepreneurs than VCs, and that outcomes may be linked to conflicts of interest.

We analyze the value created by a dynamic integrated risk management strategy involving liquidity management, derivatives hedging, and operating flexibility, in the presence of several frictions. We show that liquidity serves a critical and distinct role in risk management, justifying high levels of cash. We find that the marginal value associated with derivatives hedging is likely to be low, though we explain why some empirical studies find a higher value. We explore the complex interactions between operating flexibility and financial risk management, finding that substitution effects are nonmonotonic and are affected by operating leverage, the nature of operating flexibility, and the effectiveness of the hedging instrument. This paper was accepted by Jerome Detemple, finance.

We examine the role of angel investors in early venture financing using a unique sample of 182 Series A preferred stock rounds. Our sample includes deals in which angels invest alone, VCs invest alone, and where both investor types co-invest. We find that deals with more angel investors have weaker cash flow and control rights, and experience longer times to resolution. Among larger deals, those financed by VCs alone are most likely to experience successful liquidation. Our overall results support the conclusion that angel objectives likely align more with entrepreneurs than VCs, and that outcomes may be linked to conflicts of interest.

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We present a dynamic structural model of integrated risk management. Several motivations for managing risk are incorporated into the model, including costs associated with external financing, distress and bankruptcy, and convexities in both corporate and personal tax structures. Risk management is enabled through a coordination of operating flexibility, liquidity management, and hedging with derivatives. We analyze the value created by this integrated risk management structure, disintegrate this value in several ways, and examine why it falls short of the value associated with a perfect risk management contract that would return firm value to that in a frictionless world. We study the relative contribution of the various rationales for managing risk, and highlight the importance of distress costs, as well as a convexity due to personal taxes on equity income that has not been emphasized to date in the literature. We also isolate the marginal contributions of the different mechanisms to manage risk. We show that liquidity serves a critical role in risk management, despite the tax penalty associated with holding cash, which provides a rationalization for the high levels of cash observed in recent empirical studies. The value attributable to derivatives usage does not appear to be significant in the presence of other risk management mechanisms, though we identify circumstances where this value might be larger, thus helping to resolve conflicting empirical evidence on this issue. We also evaluate the impact of financial agency problems that may result in speculative derivatives positions, and examine the efficacy of imposing position limits in corporate risk management policies. ∗Department of Economics, University of Verona, Verona, Italy and George Washington University School of Business, Washington, DC, USA †Robert H. Smith School of Business, University of Maryland, College Park, MD, USA

We develop a dynamic structural model of the firm that allows us to carefully analyze the value of alternative financing strategies. We first illustrate the benefits of joint versus separate optimization of dynamic financing and investment policies. We then examine the impact on firm value of investment and financing distortions due to financial agency conflicts, and highlight the compounding of these two distortions in a fully dynamic setting. We show that simple debt contract covenants designed to restrict financing or investment behavior can decrease agency costs quite effectively. We also investigate the performance of various simple financing policy heuristics. We find that these heuristics fail to capture the full value of debt financing, even though the resulting leverage distributions may appear similar to those of optimized financing policies. Generally, our results suggest that firm values can be quite sensitive to the exact specification of financing policies in a dynamic setting.

We develop a model that endogenizes dynamic financing, investment, and cash retention/payout policies in order to analyze the effect of financial flexibility on firm value. We show that the value of financing flexibility depends on the costs of external financing, the level of corporate and personal tax rates that determine the effective cost of holding cash, the firm's growth potential and maturity, and the reversibility of capital. Through simulations, we demonstrate that firms facing financing frictions should simultaneously borrow and lend, and we examine the nature of dynamic debt and liquidity policies and the value associated with corporate liquidity.

We examine a comprehensive sample of going-dark deregistrations where companies cease SEC reporting, but continue to trade publicly. We document a spike in going dark that is largely attributable to the Sarbanes-Oxley Act. Firms experience large negative abnormal returns when going dark. We find that many firms go dark due to poor future prospects, distress and increased compliance costs after SOX. But we also find evidence suggesting that controlling insiders take their firms dark to protect private control benefits and decrease outside scrutiny, particularly when governance and investor protection are weak. Finally, we show that going dark and going private are distinct economic events.

We examine the impact of business angels on 182 Series A financings and subse- quent company outcomes. Our studied rounds have a varied mix of business angel and formal venture capital investors (VCs). We find that when only angels participate in a financing round and VCs are absent, control rights are more entrepreneur-friendly, legal expenses are lower, and investors are more geographically proximate to the com- pany. Such angel-backed companies are less likely to fail and are more likely to have a successful liquidity event. We find that companies financed exclusively by VC investors also perform well, particularly when deals are large. Companies financed by both angels and VCs experience inferior outcomes. Our results suggest that entrepreneurs consider business angels to be preferred investors and VCs investing in small deals face adverse selection. For larger deals, where deeper-pocket VC participation is required, these roles reverse and angels face adverse selection when investing alongside powerful VC syndicates.

The idea of viewing corporate investment opportunities as " real options" has been around for over 25 years. Real options concepts and techniques now routinely appear in academic research in finance and economics, and have begun to influence scholarly work in virtually every business discipline, including strategy, organizations, management science, operations management, information systems, accounting, and marketing.Real options concepts have also made considerable headway in practice. Corporate managers are more likely to recognize options in their strategic planning process, and have become more proactive in designing flexibility into projects and contracts, frequently using real options vocabulary in their discussions. Thanks in part to the spread of real options thinking, today's strategic planners are more likely than their predecessors to recognize the " option" value of actions like the following:dividing up large projects into a number of stages;investing in the acquisition or production of information;introducing " modularity" in manufacturing and design;developing competing prototypes for new products; andinvesting in overseas markets.But if real options has clearly succeeded as a way of thinking, the application of real options valuation methods has been limited to companies in relatively few industries and has thus failed to live up1990s. Increased corporate acceptance and implementations of real options valuation techniques will require several changes coming together. On the theory side, we need more realistic models that better reflect differences between financial and real options, simple heuristic methods that can be more easily implemented (but that have been carefully benchmarked against more precise models), and better guidance on implementation issues such as the estimation of discount rates for the "optionless" underlying projects. On the practitioner side, we need user-friendly real options software, more senior-level buy-in, more deliberate diffusion of real options knowledge throughout organizations, better alignment of managerial incentives with long- term shareholder value, and better-designed contracts to correct the misalignment of incentives across the value chain. If these challenges can be met, there will continue to be a steady if gradual diffusion of real options analysis throughout organizations over the next few decades, with real options eventually becoming not only a standard part of corporate strategic planning, but also the primary valuation tool for assessing the expected shareholder effect of large capital investment projects.

Journal of Applied Corporate FinanceVolume 15, Issue 2 p. 32-43 A REAL OPTIONS PERSPECTIVE ON SUPPLY CHAIN MANAGEMENT IN HIGH TECHNOLOGY† Corey Billington, Corey Billington Vice-President, Supply Chain Services at Hewlett-Packard Company (corey_billington@hp.com).Search for more papers by this authorBlake Johnson, Blake Johnson Founder and Chief Technology Officer of Vivecon, a provider of software to quantify and manage risk and flexibility in the supply chain, and a consulting professor at Stanford University (blake.johnson@vivecon.com and blakej@stanford.edu).Search for more papers by this authorAlex Triantis, Alex Triantis Associate Professor of Finance at University of Maryland's Robert H. Smith School of Business (atriantis@rhsmith.umd.edu).Search for more papers by this author Corey Billington, Corey Billington Vice-President, Supply Chain Services at Hewlett-Packard Company (corey_billington@hp.com).Search for more papers by this authorBlake Johnson, Blake Johnson Founder and Chief Technology Officer of Vivecon, a provider of software to quantify and manage risk and flexibility in the supply chain, and a consulting professor at Stanford University (blake.johnson@vivecon.com and blakej@stanford.edu).Search for more papers by this authorAlex Triantis, Alex Triantis Associate Professor of Finance at University of Maryland's Robert H. Smith School of Business (atriantis@rhsmith.umd.edu).Search for more papers by this author First published: 12 April 2006 https://doi.org/10.1111/j.1745-6622.2002.tb00693.xCitations: 51Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Citing Literature Volume15, Issue2December 2002Pages 32-43 RelatedInformation

In the mid‐1980s, financial economists began building option‐based models to value corporate investments in real assets, laying the foundation for an extensive academic literature in this area. The 1990s saw several books, numerous conferences, and many articles aimed at corporate practitioners, who began to experiment with these techniques. Now, as we approach the end of 2001, the real options approach to valuing real investments has established a solid, albeit limited, foothold in the corporate world.Based on their recent interviews with 39 individuals from 34 companies in seven different industries, the authors of this article attempt to answer the question, “How is real options being practiced, and what impact is it having in the corporate setting?” The article identifies three main corporate uses of real options—as a strategic way of thinking, an analytical valuation tool, and an organization‐wide process for evaluating, monitoring, and managing capital investments. For example, in some companies, real options is used as an input into an M&A process in which rigorous numerical analysis plays only a small role. In such cases, real options contributes as a qualitative way of thinking, with little formality either in terms of analytical rigor or organizational procedure. In other firms, real options is used in a commodity trading environment where options are clearly specified in contracts and simply need to be valued. In this case, real options functions as an analytical tool, though generally only in specialized areas of the firm and not on an organization‐wide basis. In still other companies, real options is used in a technology or R&D context where the firm's success is driven by identifying and managing potential sources of flexibility. In such cases, real options functions as an organization‐wide process with both a broad conceptual and analytical core.The companies that have shown the greatest interest in real options generally operate in industries where large investments with uncertain returns are commonplace, such as oil and gas, and life sciences. Major applications include the evaluation of exploration and production investments in oil and gas firms, generation plant investments in power firms, R&D portfolios in pharmaceutical and biotech firms, and technology investment portfolios in high‐tech firms.While the approaches to implementation are quite varied, there appears to be a common path to the successful adoption of real options. The key steps of the adoption process are: (1) conducting pilot projects; (2) getting buy‐in from senior‐level and rank‐and‐file managers; (3) codifying real options through expert working groups, specialist training, and customization; and (4) institutionalizing and integrating real options firm‐wide. After citing best practices for each of these four steps, the authors close by predicting that a “network” effect and acceptance by Wall Street will serve as catalysts for more widespread corporate use of real options.

Covenants not to compete (CNCs) are used in employment contracts to prevent employees from working for other employers. The legal enforcement of CNCs varies across jurisdictions in the U.S.: some states ban them (notably, California), while a majority of states enforce CNCs when they reasonably protect a legitimate interest of the employer. The discrepancy in the legal policy regarding CNCs is reflected in an academic debate over the economic efficiency of these covenants. One side argues that CNCs are bad because they restrict labor mobility; the other side argues that the restriction on the movement of workers is good because it prevents workers from appropriating their employers' human capital investments (and CNCs thereby encourage such investment). The paper addresses together the two objectives of ex post (labor mobility) and ex ante (human capital investment) efficiency. It compares CNCs with the the alternative contract breach remedies of specific performance and liquidated damages. A given CNC may be analyzed as a hybrid that adopts specific performance with respect to attempted movements to employers within its scope and liquidated damages equal to zero with respect to movements outside its scope. Among the results of the paper is the finding that, where a CNC can be renegotiated, first-best performance and first-best investment can be induced. The appropriate choice of the CNC scope can balance perfectly the overinvestment tendency of specific performance against the underinvestment effect caused by zero liquidated damages. Contracting parties, however, have the incentive to agree to excessively broad CNCs that enable them to extract rents from prospective new employers within the CNC scope. The law should be wary of this incentive in policing CNCs.