Stock-based compensation is the standard solution to agency problems between shareholders and managers. In a dynamic … managers to work harder, it also induces them to hide any worsening of the firm's investment opportunities by following largely …-valued while managers hide the bad news to shareholders. We find that a firm-specific compensation package based on both stock and …

We study the joint determination of fund managers' contracts and equilibrium asset prices. Because of agency frictions …, investors make managers' fees more sensitive to performance and benchmark performance against a market index. This makes … managers unwilling to deviate from the index and exacerbates price distortions. Because trading against overvaluation exposes …

from trade under Bertrand and Cournot oligopoly. Firms differentiate their products to mitigate competition, but only if …

incentive to induce managers to pursue actions which increase the speculative component in the stock price. Our model provides a …