This paper provides a theoretical model for explaining the separation of ownership and control in firms. An entrepreneur hires a worker, whose effort is necessary for running a project. The worker's effort determines the probability that the project will be completed on time, but the worker...

I explain the standard carried interest contract as a mechanism to induce incentive compatible fund leverage while also satisfying LP return objectives. Fee, leverage and target return data from private equity real estate (PERE) funds are used to calibrate the model. Steps in the modeling...

Using a regulation that increased portfolio disclosure frequency of US mutual funds as an exogenous shock shortening funds’ investment horizon, we find that affected funds influence portfolio firms to reduce the pay duration of their executives to incentivize them to also have shorter...

This paper investigates how precautionary trading behavior of fund managers induced by a higher junior fee component in their compensation structure affects prices of downgraded loans in the leveraged loans market. Using detailed portfolio data from Collateralized Loan Obligation (CLO) funds, we...

We examine the effect of liability protection on the compensation of directors and on takeover outcomes. Consistent with the hypothesis that directors require additional compensation if they bear liability, we find that director compensation is higher for firms that provide less liability...

For the past 30 years, the conventional wisdom has been that executive compensation packages should include very large proportions of incentive pay. This incentive pay orthodoxy has become so firmly entrenched that the current debates about executive compensation simply take it as a given. We...

Executive equity compensation in the U.S. is evolving. At the turn of the millennium, stock options dominated the equity pay landscape, accounting for over half of the aggregate ex ante value of senior executive pay at large public companies, while restricted stock and similar compensation...

This article examines managers' incentive to play it safe. We find that, after managers are insulated by the adoption of an antitakeover law, they take value-destroying actions that reduce their firms' stock volatility and risk of distress. To illustrate one such action, we show that managers...

Previous literature shows that securities litigation is positively impacted by management compensation with a focus on the delta, but not the vega, component of compensation. We argue that the vega, rather than the delta, component of management compensation should be associated with litigation...

The problem of managerial short-termism has long preoccupied policymakers, researchers, and practitioners. These groups have given much less attention, however, to the converse problem of managerial long-termism. Michal Barzuza and Eric Talley fill this gap in their pioneering article, Long-Term...