This paper analyzes a dynamic moral hazard problem in which the agent's unobservable effort in each period affects both current and future cash flows. For incentive contracting purposes, the principal can rely on realized and projected future cash flows. We find that a properly structured...

In this article we develop a multiperiod agency model to study the role of leading indicator variables in managerial performance measures. In addition to the familiar moral hazard problem, the principal faces the task of motivating a manager to undertake "soft" investments. These investments are...