We analyze the voting behavior of a board of directors that has to approve (or reject) an investment proposal with uncertain return. We consider three types of directors: insiders, who are biased toward acceptance of the project, independent outsiders who want to maximize the firm’s profit and...

We analyze the optimal ownership, delegation and compensation structures when a manager is hired to run a firm and to gather information on investment projects. The initial owner has two tasks: monitoring the manager and supervising project choice. Optimality would require a large ownership...

The paper analyzes the optimal structure of the board of directors in a firm with a large shareholder sitting on the board. In a one-tier structure the sole board performs all tasks, while in a two-tier structure the management board is in charge of project selection and the supervisory board is...

Corporate scandals, reflected in excessive management compensation and fraudulent accounts, cause considerable damage. Agency theory’s insistence on linking the compensation of managers and directors as closely as possible to firm performance is a major reason for these scandals. They cannot...

Peer reviews and rankings today are the backbone of research governance, but recently came under scrutiny. They take explicitly or implicitly agency theory as a theoretical basis. The emerging psychological economics opens a new perspective. As scholarly research is a mainly curiosity driven...

Why do for-profit firms take voluntary steps to improve the environment? Brand appeal to green consumers or investors, the ability to influence or avoid regulation, or the experience gained for future regulation, have all been suggested as possible reasons. The empirical evidence is decidedly...

In the large literature on firm performance, economists have given little attention to entrepreneurs. We use deaths of more than 500 entrepreneurs as a source of exogenous variation, and ask whether this variation can explain shifts in firm performance. Using longitudinal data, we find large and...

Reportedly, firms often find it impossible to finance large and long-term projects despite positive net present values. Should governments step in and can their assistance be effective? This paper studies the case of public export credit guarantees in Germany. Covering the default risk of...

Concentrated ownership of large listed companies is widespread throughout the world, and Germany is typical in this respect. This paper proposes a method of distinguishing empirically between the beneficial and harmful effects of ownership concentration, and applies it to German data. The...