We study managerial incentive provision under moral hazard in an environment where growth opportunities arrive stochastically over time and taking them requires a change of management. The firm faces a trade-off between the benefit of always having a manager able to seize new opportunities and...

We study the evolution of pay in US bank holding companies since 1986 using a structural model of the banking firm. The model incorporates a strong complementarity between capital provided by shareholders and bankers' talent and its non-contractible effort. Bankers' pay is given as solution to...