Our paper evaluates recent regulatory proposals mandating the deferral of bonus payments and claw-back clauses in the financial sector. We study a broadly applicable principal agent setting, in which the agent exerts effort for an immediately observable task (acquisition) and a task for which...

We offer a theory of the "boundary of the firm" that is tailored to banking, as it builds on a single inefficiency arising from risk-shifting and as it takes into account both interbank lending as an alternative to integration and the role of possibly insured deposit funding. Amongst others, it...

This paper provides a complete characterization of optimal contracts in principal-agent settings where the agent's action has persistent effects. We model general information environments via the stochastic process of the likelihood-ratio. The martingale property of this performance metric...

This paper provides a complete characterization of optimal contracts in principal-agent settings where the agent's action has persistent effects. We model general information environments via the stochastic process of the likelihood-ratio. The martingale property of this performance metric...

We offer a theory of the "boundary of the firm" that is tailored to banking, as it builds on a single inefficiency arising from risk-shifting and as it takes into account both interbank lending as an alternative to integration and the role of possibly insured deposit funding. Amongst others, it...

This paper proposes an indirect tax approach to derive positive and normative implications of regulatory interference in compensation contracts, focusing on recent mandatory deferral and clawback requirements in the financial sector. Moderate deferral requirements for bonus-pay typically lead to...

This paper characterizes optimal compensation contracts in principal-agent settings where the agent's action has persistent effects. As additional informative signals arrive over time, deferred compensation has the benefit of exploiting better performance measurement which, for any information...

Agencies around the world are in the process of developing taxonomies and standards for sustainable (or ESG) investment products. A key assumption in our model is that of non-consequentialist private investors (households) who derive a "warm glow" decisional utility when purchasing an investment...