Agency models of multiple tasks typically assume independent outcomes. We show that correlation between outcomes can generate both economy and diseconomy of scale through diversification and competition effects. Additionally, the optimal compensation is non-monotone if the correlation is large.

We study a competitive model in which managers differ in ability and choose unobservable effort. Each firm chooses its size, how able a manager is to hire, and managerial compensation. The model can be considered an amalgam of agency and Superstars, where optimizing incentives enhances the...

This paper revisits the question of whether CEO compensation practices are in keeping with those justified by agency theory. We develop and analyze a new panel Tobit model, estimated by modern Bayesian methods, in which the heterogeneity of covariate effects across firms is modeled in a...

Many directors are not simply insiders or outsiders. For example, an officer of a supplier is neither independent nor captive of management. We use a spatial model of board decision-making to analyze bargaining among multiple types of directors. Board decisions are modeled using a new solution...

Prior research suggests that executive option grants that do not quickly vest provide managers with better incentives to pursue long-term, instead of short-term, objectives. Previous research also suggests that the pursuit of long-term objectives could be undermined by the risk of early...

Disclosure by firms would seem to reduce investment inefficiency by reducing informational asymmetry. However, the impact of disclosure is endogenous and depends on incentives within the firm. Given optimal renegotiation-proof contracts, disclosing only accepted contracts does not solve the...

This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period from 1962 to 1997 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly, correlations among individual...

This article studies the behavior of idiosyncratic volatility for the postWorld War II period. Using aggregate idiosyncratic volatility statistics constructed from the Fama and French (1993) three-factor model, we find that the volatility of individual stocks appears to have increased over time....

This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period 1962-97 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly correlations among individual stocks and...