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Size matters: "Over"investments in a relational contracting setting

Englmaier, Florian; Fahn, Matthias - 2015

The corporate finance literature documents that managers tend to overinvest into physical assets. A number of theoretical contributions have aimed to explain this stylized fact, most of them focussing on a fundamental agency problem between shareholders and managers. The present paper shows that...

Persistent link: https://www.econbiz.de/10011350835

Reciprocity in dynamic employment relationships

Fahn, Matthias - 2019

This paper explores how a relational contract establishes a norm of reciprocity and how such a norm shapes the provision of informal incentives. Developing a model of a long-term employment relationship, I show that generous upfront wages that activate the norm of reciprocity are more important...

Persistent link: https://www.econbiz.de/10012018325

The commitment role of equity financing

Fahn, Matthias; Wamser, Georg; Merlo, Valeria - 2017

Existing theories of a firm's optimal capital structure seem to fail in explaining why many healthy and profitable firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and the bankruptcy risk low. This holds in particular for...

Persistent link: https://www.econbiz.de/10011916757

The Commitment Role of Equity Financing

Fahn, Matthias; Wamser, Georg; Merlo, Valeria - 2017

Existing theories of a firm\'s optimal capital structure seem to fail in explaining why many healthy and profitable firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and the bankruptcy risk low. This holds in particular for...

Persistent link: https://www.econbiz.de/10011932906

Size Matters - 'Over'investments in a Relational Contracting Setting

Englmaier, Florian; Fahn, Matthias - 2018

The corporate finance literature documents that managers tend to over-invest in their companies. A number of theoretical contributions have aimed at explaining this stylized fact, most of them focusing on a fundamental agency problem between shareholders and managers. The present paper shows...

Persistent link: https://www.econbiz.de/10011932927

Relational Contracts with Private Information On the Future Value of the Relationship: The Upside of Implicit Downsizing Costs

Fahn, Matthias; Klein, Nicolas - 2018

We analyze a relational contracting problem, in which the principal has private information about the future value of the relationship. In order to reduce bonus payments, the principal is tempted to claim that the value of the future relationship is lower than it actually is. To induce...

Persistent link: https://www.econbiz.de/10011932971

Household relational contracts for marriage, fertility and divorce

Fahn, Matthias; Rees, Ray - 2011

, how many children to have and subsequently whether to stay together or separate. We make precise the idea that cooperation …-payments are used to support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires … a stable relationship and credible punishment threats. Within this relational contracts framework, we analyze the …

Persistent link: https://www.econbiz.de/10010279386

Reciprocity in Dynamic Employment Relationships

Fahn, Matthias - 2020

This paper analyzes a dynamic relational contract for employees with reciprocal preferences. I develop a tractable model to investigate how “direct” performance-pay (promising a bonus in exchange for effort) and generous upfront wages (which activate the norm of reciprocity) interact over...

Persistent link: https://www.econbiz.de/10012269484

Reciprocity in dynamic employment relationships

Fahn, Matthias - 2019

This paper explores the optimal provision of dynamic incentives for employees with reciprocal preferences. Building on the presumption that a relational contract can establish a norm of reciprocity, I show that generous upfront wages that activate an employee's reciprocal preferences are more...

Persistent link: https://www.econbiz.de/10012290329

The reciprocity in dynamic employment relationships

Fahn, Matthias - 2020

This paper analyzes a dynamic relational contract for employees with reciprocal preferences. I develop a tractable model to investigate how "direct" performance-pay (promising a bonus in exchange for effort) and generous upfront wages (which activate the norm of reciprocity) interact over the...

Persistent link: https://www.econbiz.de/10012662694