BOLTON Patrick

The thesis consists of five articles, three of which are on the external control mechanisms of firms and two on the application of game theory to the study of competition between firms. Chapter 1 studies the financial engineering problem of allocating voting rights among the securities issued by a firm. It is shown that it may be optimal for a firm to issue non-voting securities in the perspective of a takeover bid. Chapter 2 applies the modern theory of delegation, supervision and authority to the external control of a firm. In particular, it is shown that a compromise must be found between supervision by a large shareholder and initiative left to the executive managers of the firm. Chapter 3 studies an optimal financial contract problem in a dynamic setting. It is shown that when the parties (lender and borrower) cannot agree not to renegotiate the current contract, the lender derives zero profit from the relationship. Chapter 4, consisting of two essays, extends the barrier to entry models to the case of dynamic competition between asymmetric firms. It is shown that the entry of a less efficient competitor is likely to be temporary while that of a more efficient competitor is permanent.