This paper explores how motivating an incumbent CEO to make investments that improve the effectiveness of the firm organization under his management interacts with the replacement policy of the board of directors. We characterize the optimal compensation package (including severance pay) under...

This paper provides empirical evidence consistent with the facts that (1) social networks may strongly affect board composition and (2) social networks may be detrimental to corporate governance. Our empirical investigation relies on a unique dataset on executives and outside directors of...

We study the impact of directors with foreign experience on firms in emerging markets. To establish causality, we use a unique dataset from China and exploit that at different times, Chinese provinces introduced policies to attract highly talented emigrants. These policies led to an exogenous...

We present a novel source of disagreement grounded in decision theory: ambiguity aversion. We show that ambiguity aversion generates endogenous disagreement between a firm's insider and outside shareholders, creating a new rationale for corporate governance systems. In our paper, optimal...

This paper presents a rational expectations model of optimal executive compensation in a setting where managers are in a position to manipulate short-term stock prices, and managers' propensity to manipulate is uncertain. Stock-based incentives elicit not only productive effort, but also costly...

Mutual funds are significant blockholders in many corporations. Concerns that funds vote in a pro-management manner to garner lucrative pensions contracts led the SEC to mandate the disclosure of proxy votes. We present a model of mutual fund voting in the presence of potential business ties. We...

This Paper analyses the interaction between legal shareholder protection, managerial incentives, and ownership concentration. In our framework, blockholder and manager are distinct parties and the presence of a blockholder can both protect and hurt minority shareholders. Legal shareholder...

Globalization has been identified by many experts as a new way firms organize their activities. This Paper surveys recent work that examines the role of trade integration between similar and dissimilar countries for these changes in corporate organization. It is shown that international...

This paper interprets the existing evidence on enterprise restructuring in Poland, Hungary and the Czech Republic. Despite differences in restructuring policies, the pattern of observed restructuring appears similar in the three countries. Contrary to initial expectations, managers of SOEs have...

This Paper provides an overview of the main theoretical elements and empirical underpinnings of a ‘managerial power’ approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between...