The Industrial Organization literature investigates the product market decisions of a firm while the corporate finance literature explores the financing decisions of the firm. But the truth is both the financing decisions and the product market decisions are interdependent and should be modeled...

We examine the impact of optimistic directors that are members of boards and compensation committees on CEOs compensation. We find that optimistic boards and compensation committees reward CEOs with a higher proportion of equity-based compensation. We utilize two natural experiments,...

This paper introduces financing constraint in a model of incentive compensation and product market and develops key insights about the interactions of product market behavior, financial constraint and incentive compensation. A financially constrained firm faces higher cost of capital which...

This study examines how the board of directors’ pay structure may influence accounting- and market-based measures of firm performance, and how firm complexity in pay structure is associated with firm performance. We integrate the insights of the Board Capital View and Contingency theory to...

We develop a theoretical model of managerial myopia based on the Q theory of investment. In this model, the manager chooses both investment quantity and the investment horizon. The manager may be myopic, causing an excess weight to be placed by the manager on short term profits, relative to...