In this paper we use agency theory to study the active role of the chief executive in the formulation of corporate strategy. Unlike traditional applications of agency theory, we allow the agent (CEO) to play a role in defining the parameters of the agency problem. We argue that CEOs will have an...

Risk-neutral individuals take more risky decisions when they have limited liability.  Risk-neutral managers may not when acting as agents under contract and taking costly actions to acquire informatin before taking decisions.  Limited liability makes it optimal to increase the reward for...

We reconsider the job design theory of Holmstrom and Milgrom (1991), to include career concerns considerations. When reputations are considered, discretion may play a more integral part of the incentive scheme. It can be a useful instrument to enhance incentives and prevent the adverse selection...

This paper examines the efficiency of stock based compensation by valuing stock and options from the executive`s point of view. Companies give compensation in the form of stock in order to align incentives by providing a link between executive wealth and the stock price performance of the...

This paper considers why organizations use promotions, rather than just monetary bonuses, to motivate employees even though this may conflict with efficient assignment of employees to jobs. When performance is unverifiable, use of promotion reduces the incentive for managers to be affected by...

This paper considers why organizations use promotions, rather than just monetary bonuses, to motivate employees even though this may conflict with efficient assignment of employees to jobs. When performance is unverifiable, use of promotion reduces the incentive for managers to be affected by...

Part ownership of a takeover target can help a bidder win a takeover auction, often at a low price. A bidder with a toehold bids aggressively in a standard ascending auction because its offers are both bids for the remaining shares and asks for its own holdings. While the direct effect of a...

This paper analyses the real economy effects of firms having some shareholders with a short investment horizon on their shareholder register.  Short-term shareholders cause management to be concerned with the path of the share price as well as its ultimate value.  Such shareholders in an...

We study price formation in securities markets, using the sequential trade framework of Glosten and Milgrom [7]. This paper makes one basic methodological advance over previous research on sequential securities trading: we allow traders to choose from n trade sizes in a multi-period market,...

We use an online real-effort experiment to investigate how bonus-based pay and worker productivity interact with workplace cheating.  Firms often use bonus-based compensation plans, such as group bonuses and firm-wide profit sharing, that induce considerable uncertainty in how much workers are...