We examine the employment decisions of Spanish manufacturing firms in financial distress. Our sample comprises 4,566 firms operating during 1983-1994. We find that firms in distress reduce their employment significantly. These reductions are positively associated with asset sales, but cannot be...

This paper explores how motivating an incumbent CEO to make investments that improve the effectiveness of the firm's organization interacts with the replacement policy of the board of directors. We characterize the optimal compensation package (including severance pay) under governance...

This paper models the process of policy making at the top level of the firm: its board of directors. Directors are expected to both advise and monitor the CEO to ensure that shareholders' wealth is maximized. The more independent directors are the better they will fullfil this fiduciary duty....

This paper provides a theory of venture capital financing based on the complementarity between the financing and advising roles of venture capitalists. We examine the interaction between the staging of investment, that characterizes young firms with a high growth potential, and the double-sided...

We explore the business-cycle implications of agency problems between firms and financiers. We show how these problems create liquidity shortages that can lead to corporate bankruptcy, and may generate aggregate, endogenous cycles in an economy that otherwise would have had a unique, stationary...