We develop a model in which CEOs envy each other based on their compensation. When CEO compensation is increasing in the firm's market value and size, we show that envy can cause merger waves even when the shock that precipitated the first merger in the wave is purely idiosyncratic. The analysis...

We examine corporate governance effectiveness when the CEO generates project ideas and the board of directors screens these ideas for approval. However, the precision of the board's screening information is controlled by the CEO. Moreover, both the CEO and the board have career concerns that...

We model agents whose preferences exhibit envy. An envious agent's utility is increasing in what he has and decreasing in what others have. With this setup we are able to provide a new perspective on the nature of investment distortions with centralized and decentralized capital budgeting...

We study a situation in which a manager, whose ability to select good projects is unknown a priori, proposes a project for funding. The manager's superior can observe the information about project quality generated by the manager, but cannot observe the resources devoted by the manager to...

This paper reports the findings of a recent survey of 1019 individuals to learn about their commitment to and perceived value from personal and organizational higher purpose, and examines the implications of the findings for corporate governance and the stated corporate goal of shareholder value...

This paper examines the distortionary phenomena which occur when agents within the firm react to the organizational reality that the evaluation of the ideas that they analyze is often inseparable from the evaluation of their own ability. The commingling of the assessment of the business issue...

This paper provides a brief assessment of how ethics, culture and corporate governance have evolved in banking since the financial crisis. It concludes that we need to strengthen capital ratios and equity governance in banking to improve ethics and culture, and de-emphasize liquidity regulation....

Organizational higher purpose is gaining increasing traction in both research and policy discussions about the (desired) role of corporations in society. What is higher purpose and how does it affect corporate governance? This paper defines higher purpose and surveys the literature in economics,...

Financial crises impose large and persistent social costs, making banking stability important. This article reviews the central issues surrounding the role bank capital plays in financial stability. Because the socially efficient capital level may exceed banks’ privately optimal capital...

In this paper we introduce flexibility as an economic concept and apply it to the firm’ssecurity issuance decision and capital structure choice. Flexibility is the ability to makedecisions that one thinks are best even when others disagree. The firm’s management valuesflexibility because it...