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Infrastructure projects involve multiple parties: a government, private sector firms that build and manage, and outside investors who supply financing. Private sector firms need incentives to implement and maintain the projects well; governments may lack commitment not to extort cash flows (for...
Persistent link: https://www.econbiz.de/10012823581
We examine the optimal financing of infrastructure when governments have limited financial commitment and can expropriate rents from private sector firms that manage infrastructure. While private firms need incentives to implement projects well, governments need incentives to limit...
Persistent link: https://www.econbiz.de/10013334350
When firms compete in the managerial labor market, the choice of corporate governance by a firm affects, and is affected by, the choice of governance by other firms. Firms with weaker governance offer managers more generous compensation packages to incentivize them. This behavior forces firms...
Persistent link: https://www.econbiz.de/10012725241
When firms compete in the managerial labor market, the choice of corporate governance by a firm affects, and is affected by, the choice of governance by other firms. Firms with weaker governance offer managers more generous compensation packages to incentivize them. This behavior forces firms...
Persistent link: https://www.econbiz.de/10012720982
Banks face two different kinds of moral hazard problems: asset substitution by shareholders (e.g., making risky, negative net present value loans) and managerial rent seeking (e.g., investing in inefficient 'pet' projects and consuming perquisites that yield private benefits). The privately...
Persistent link: https://www.econbiz.de/10010287043
Banks face two different kinds of moral hazard problems: asset substitution by shareholders (e.g., making risky, negative net present value loans) and managerial rent seeking (e.g., investing in inefficient “pet” projects and consuming perquisites that yield private benefits). The privately...
Persistent link: https://www.econbiz.de/10008657183
We develop a theory of optimal bank leverage in which the benefit of debt in inducing loan monitoring is balanced against the benefit of equity in attenuating risk-shifting. However, faced with socially-costly correlated bank failures, regulators bail out creditors. Anticipation of this...
Persistent link: https://www.econbiz.de/10013038182
We develop a theory of optimal bank leverage in which the benefit of debt in inducing loan monitoring is balanced against the benefit of equity in attenuating risk-shifting. However, faced with socially-costly correlated bank failures, regulators bail out creditors. Anticipation of this...
Persistent link: https://www.econbiz.de/10013038378
We present a model where firms compete for scarce managerial talent ("alpha") and managers are risk-averse. When managers cannot move across firms after being hired, employers learn about their talent, allocate them efficiently to projects and provide insurance to low-quality managers. When...
Persistent link: https://www.econbiz.de/10012940502
We consider a model in which the threat of bank liquidations by creditors as well as equity-based compensation incentives both discipline bankers, but with different consequences. Greater use of equity leads to lower ex ante bank liquidity, whereas greater use of debt leads to a higher...
Persistent link: https://www.econbiz.de/10012972368