Agency costs are a cost of production, and firms that do a better job of minimizing these costs should exhibit better performance. This paper tests this hypothesis by calculating the performance elasticity of average employee hourly compensation for U.S. manufacturing firms. This elasticity...

The present paper proposes to employ a major shift in the legal and institutional environment to identify contractual incentives from the correlation of executive pay and firm performance. We use the reform of the German stock companies act in 1884 as such a major shift and estimate the...

We analyze the relation of firm performance and managerial turnover in 19th century German banking by probit estimation. This period covers a major reform of corporate governance. Before the reform performance and turnover are unrelated, wheras after the reform more succesfull managers leave...

This essay is a contribution to the empirical literature on the effect of inflation tax on capital structure. A simple empirical model considering the main results of the current theoretical development is studied, using microdata from a number of American corporations.

The dynamic transformation of the Polish economy from a centrally planned to market economy is by now well advanced. The transformation has also contributed to a rapid development of the capital market. However, the leveraged buyout market has hardly been developed yet. The leveraged buyout...

(forthcoming Journal of Political Economy). 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...

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...

India, with its 20 million shareholders, is one of the largest emerging markets in terms of the market capitalization. In order to protect the large investor base, the Securities and Exchange Board of India (SEBI) has enforced a regulation effective from April 2001, requiring mandatory...

Using an econometric procedure that corrects for both self-selection of individuals into their preferred compensation scheme and wage endogeneity, this study investigates whether significant differences exist in the job satisfaction of individuals receiving performance- related pay (PRP)...

The rent-sharing literature and the agency literature both predict a link between pay and performance. The rent-sharing literature relies on short-term market power to explain this link, and the agency literature bases its prediction on the importance of incentives in principal-agent...