This paper introduces financing constraint in a model of incentive compensation and product market and develops key insights about the interactions of product market behavior, financial constraint and incentive compensation. A financially constrained firm faces higher cost of capital which...

We develop a theoretical model of managerial myopia based on the Q theory of investment. In this model, the manager chooses both investment quantity and the investment horizon. The manager may be myopic, causing an excess weight to be placed by the manager on short term profits, relative to...