We introduce dynamic incentive contracts into a model of unemployment dynamics and present three results. First, wage cyclicality from incentives does not dampen unemployment dynamics: the response of unemployment to shocks is first-order equivalent in an economy with flexible incentive pay and...

We study the relationship between compensation and risk-taking among finance firms using a neglected insight from principal-agent contracting with hidden action and risk-averse agents. If the sensitivity of pay to stock price or slope does not vary with stock price volatility, then total...

In this paper, we examine the propensity for U.S. public companies to become targets for private equity-backed, take-private transactions. We consider the characteristics of 483 private equity-backed deals in the 2000-2007 period relative to public companies, and find that, in addition to the...

This paper assesses the effects of central bank governor appointments on financial market expectations of monetary policy. To measure these effects, we assemble a new dataset of appointment announcements from 15 countries, and conduct an event study analysis on exchange rates, bond yields, and...

This paper investigates how shocks to expected cash flows influence CEO incentive compensation. Exploiting changes in compliance with environmental regulations as shocks to expected future cash flows, we find that adverse shocks typically prompt corporate boards to recalibrate CEO compensation...

In a model with multiple Pareto-ranked equilibria we add trade in assets that pay based on the realization of a sunspot. Asset trading restricts the equilibrium set in a way that raises welfare by eliminating equilibria with a high likelihood of disasters. When the probability of a disaster is...

This chapter develops a unified framework for the study of how network interactions can function as a mechanism for propagation and amplification of microeconomic shocks. The framework nests various classes of games over networks, models of macroeconomic risk originating from microeconomic...

"We analyze the relationship between financial development and inter-industry resource allocation in the short- and long-run. We suggest that in the long-run, economies with high rates of financial development will devote relatively more resources to industries with a 'natural' reliance on...