Security Design with Investor Private Information

I study the security design problem of a firm when investors rather than managers have private information about the firm. I find that it is often optimal to issue information-sensitive securities like equity. The "folklore proposition of debt" from traditional signalling models only goes through if the firm can vary the face value of debt with investor demand. When the firm has several assets, debt backed by a pool of assets is optimal when the degree of competition among investors is low, while equity backed by individual assets can be optimal when competition is high.Security design; Capital Structure; Auctions; Asset backed securities

AEROX: Computer program for transonic aircraft aerodynamics to high angles of attack. Volume 1: Aerodynamic methods and program users' guide

The AEROX program estimates lift, induced-drag and pitching moments to high angles (typ. 60 deg) for wings and for wingbody combinations with or without an aft horizontal tail. Minimum drag coefficients are not estimated, but may be input for inclusion in the total aerodynamic parameters which are output in listed and plotted formats. The theory, users' guide, test cases, and program listing are presented

Liquidity and Manipulation of Executive Compensation Schemes

Several standard components of managerial compensation contracts have been criticized for encouraging managers to manipulate short-term information about the firm, thereby reducing transparency. This includes bonus schemes that encourage earnings smoothing, and option packages that allow managers to cash out early when the firm is overvalued. We show in an optimal contracting framework that these components are critical for giving long-term incentives to managers. The lack of transparency induced by the features of the contract makes it harder for the principal to engage in ex post optimal but ex ante inefficient liquidity provision to the manager.Executive compensation; earnings management; transparency

Comparisons of AEROX computer program predictions of lift and induced drag with flight test data

The AEROX aerodynamic computer program which provides accurate predictions of induced drag and trim drag for the full angle of attack range and for Mach numbers from 0.4 to 3.0 is described. This capability is demonstrated comparing flight test data and AEROX predictions for 17 different tactical aircraft. Values of minimum (skin friction, pressure, and zero lift wave) drag coefficients and lift coefficient offset due to camber (when required) were input from the flight test data to produce total lift and drag curves. The comparisons of trimmed lift drag polars show excellent agreement between the AEROX predictions and the in flight measurements

Preliminary performance estimates of a highly maneuverable remotely piloted vehicle

A computerized synthesis program has been used to assess the effects of various vehicle and mission parameters on the performance of a highly maneuverable remotely piloted vehicle (RPV) for the air-to-air combat role. The configuration used in the study is a trapezoidal-wing and body concept, with forward-mounted stabilizing and control surfaces. The study mission consists of an outbound cruise, an acceleration phase, a series of subsonic and supersonic turns, and a return cruise. Performance is evaluated in terms of both the required vehicle weight to accomplish this mission and combat effectiveness as measured by turning and acceleration capability. The report describes the synthesis program, the mission, the vehicle, and the results of sensitivity and trade studies

Why are Buyouts Levered: The Financial Structure of Private Equity Funds

This paper presents a model of the financial structure of private equity firms. In the model, the general partner of the firm encounters a sequence of deals over time where the exact quality of each deal cannot be credibly communicated to investors. We show that the optimal financing arrangement is consistent with a number of characteristics of the private equity industry. First, the firm should be financed by a combination of fund capital raised before deals are encountered, and capital that is raised to finance a specific deal. Second, the fund investors' claim on fund cash flow is a combination of debt and levered equity, while the general partner receives a claim similar to the carry contracts received by real-world practitioners. Third, the fund will be set up in a manner similar to that observed in practice, with investments pooled within a fund, decision rights over investments held by the general partner, and limits set in partnership agreements on the size of particular investments. Fourth, the model suggests that incentives will lead to overinvestment in good states of the world and underinvestment in bad states, so that the natural industry cycles will be multiplied. Fifth, investments made in recessions will on average outperform investments made in booms.