In modern businesses, firms face new challenges of managerial retention in capital budgeting process. We consider a model in which a manager privately observes the capital productivity of a project and has access to multiple outside financing options. We show that if the manager can obtain...

We develop a theory of how agency conflicts between the shareholders and debt holders of a financial institution, accounting measurement rules, and prudential capital regulation interact to affect the institution's capital structure and project choices. We show that, relative to a benchmark...

We show how shareholder-debtholder agency conflicts interact with strategic reporting under asymmetric information to influence bank regulation. Relative to a benchmark unregulated economy, higher capital requirements mitigate inefficient asset substitution, but potentially exacerbate under...

We develop a model to show how shareholder-creditor agency conflicts interact with accounting measurement rules to influence the design of bank capital regulation. Relative to a benchmark autarkic regime, higher capital requirements mitigate inefficient asset substitution, but exacerbate...