This note deals with the simplified case of a principal (e.g., a firm's board of directors) which delegates execution of an economic activity to a business unit (or a subsidiary firm) managed by a manager. It is assumed that the manager has no control over the cash flows injected into the unit...

We examine the impact of CEO tenure on corporate labor investment efficiency. While some studies show that CEO entrenchment increases in tenure (e.g., Hermalin and Weibach, 1998), others argue that managerial expertise builds over time in the office (e.g., Graf-Vlachy et al., 2020). Using a...

Agency conflicts arising from asymmetric information between insiders and outsiders affect company investment decisions in imperfect capital markets. This study examines the influence of managerial shareholding and financial constraints on investment choices. Utilizing panel data from 60...

We examine whether CEO extraversion, an important personality trait associated with leadership, affects firms' expected cost of equity capital. We measure CEO extraversion using CEOs' speech patterns during the unscripted portion of conference calls. After controlling for several CEO and firm...

This paper studies how biases in managerial beliefs affect managerial decisions, firm performance, and the macroeconomy. Using a new survey of US managers I establish three facts. (1) Managers are not over-optimistic: sales growth forecasts on average do not exceed realizations. (2) Managers are...

We examine how creditor protection affects firms with different levels of owners' and managers' personal costs of bankruptcy. Theoretically, we show that firms with high personal costs of bankruptcy borrow and invest more under a more debtor-friendly management stay system, whereas firms with...

This paper examines how the firm's choice of investment horizon interacts with rent-seeking by privately-informed, multi-tasking managers and the labor market. There are two main results. First, managers prefer longer-horizon projects that permit them to extract higher rents from firms, so...

IPO firms with high-powered CEO incentive contracts have lower failure rates in the aftermarket. Economically, an interquartile change in the distribution of CEO pay translates in a reduction of the failure risk probability by approximately 21%. The Pay Gap between the CEO and its subordinate...