Managers of firms with excess cash tend to misuse it. We extend the Radner-Shepp- Shiryaev framework, to create an incentive mechanism (the ‘carrot') to motivate managers to pay out the cash instead. The problem cannot be solved in closed- form, and we devise a numerical technique to solve it....

This study aims to examine the impact of option incentives on corporate innovations in the representative emerging and transition economy. By utilizing the Chinese dataset, we find a noteworthy positive impact of option incentives on two dimensions of innovation: inputs and outputs. These...