This article studies director additions and removals for S&P 500 firms during the period 2000 to 2003. It finds that firms with smaller board size than estimated efficient levels add more and remove fewer directors than firms with larger board size. It also finds that firms with lower board...

We examine the power of incentives in bureaucracies by studying contracts offered by a bureaucrat to her agent. The bureaucrat operates under a fixed budget, optimally chosen by a funding authority, and she can engage in policy drift, which we define as inversely related to her intrinsic...

An agent may manipulate information when transmitting it to the principal. A direct response to this problem is to verify the information. The paper explores a situation where the principal engages in information verification herself or alternatively delegates it to the agent. The paper finds...

We explain why organizations that limit the voice of their agents can benefit from granting them an exit option. We study a hierarchy with a principal, a productive supervisor and an agent. Communication is imperfect in that only the supervisor can communicate with the principal, while the agent...

In the empirical analysis of information asymmetry in automobile insurance markets, prior research used a dichotomous measurement approach that induces excessive bundling in coverage measurements and sample selection biases. To improve on the conditional correlation method for testing...

"Integrating planning and implementation, by having one agent perform both tasks, may be effective in encouraging planning activity whose outcome is not observable. Emphasizing its information-generating role, we find that planning activity is best encouraged by partially integrating the tasks....