Economic performance depends crucially on how parties adapt to changing circumstances. We therefore study how the organization of economic activity can facilitate such adaptation. Where spot transactions would produce inefficient adaptation, we ask how governance structures (allocations of...

We examine how the level and structure of CEO pay is influenced by the characteristics and past experience of the members of the compensation committee, and also how these characteristics and experiences affect the probability of committee appointment. Our main findings indicate that (1) CEO pay...

This paper studies career concerns -- concerns about the effects of current performance on future compensation -- and describes how optimal incentive contracts are affected when career concerns are taken into account. Career concerns arise frequently: they occur whenever the market uses a...

Measured individual performance often depends on random factors which also affect the performances of other workers in the same firm, industry, or market. In these cases, relative performance evaluation (RPE) can provide incentives while partially insulating workers from the common uncertainty....

This paper examines how and when CEO debt-like compensation (i.e., “inside debt”) affects debt contracting terms and corporate investment levels. We find a negative relation between inside debt and both R&D and capital expenditures for firms with low financing constraints, but this...

The persistent outrage over CEO pay expressed by politicians, the press, media, labor unions, and the general public (but not shareholders) have prompted the imposition of a wide range of disclosure requirements, tax policies, accounting rules, governance reforms, direct legislation, and other...

We study relationships between parties who have different preferences about how to tailor decisions to changing circumstances. Our model suggests that relational contracts supported by formal contracts may achieve efficient relational adaptation. Our empirics consider revenue-sharing contracts...