We study the problem of an investor that buys an equity stake in an entrepreneurial venture, under the assumption that the former cannot monitor the latter’s operations. The dynamics implied by the optimal incentive scheme is rich andquite different from that induced by other models of...

In this paper we provide a thorough characterization of the asset returns implied by a simple general equilibrium production economy with convex investment adjustment costs. When households have EpsteinÐZin preferences, there exist plausible parameter values such that the model generates...

We estimate firm–level idiosyncratic risk in the U.S. manufacturing sector. Our proxy for risk is the volatility of the portion of growth in sales or TFP which is not explained by either industry– or economy–wide factors, or firm characteristics systematically associated with growth...

How important are firm entry and exit in shaping aggregate dynamics? We address this question by characterizing the equilibrium allocation in Hopenhayn (1992)’s model of equilibrium industry dynamics, amended to allow for investment in physical capital and aggregate fluctuations. We find that...

In this paper we describe the important features of executive compensation in the US from 1993 to 2006. Some confirm what has been found for earlier periods and some are novel. Notable facts are that: the compensation distribution is highly skewed; each year, a sizeable fraction of chief...