This study provides evidence that managerial incentives, shaped by compensation contracts, help to explain the empirical relationship between uncertainty and investment. We develop a model in which the manager, compensated with an equity-based contract, makes investment decisions for a firm that...

We study non-contractible intangible investment in a dynamic agency model with multitasking. The manager's short-term task determines current performance which deteriorates with investment in the firm's future profitability, his long-term task. The optimal contract dynamically balances...