This paper considers a two-period model in which managers have superior information about their ability to forecast the realization of given investment projects. Firms compete for managers by offering short-run contracts. As future salaries depend on current play through its impact on managerial...

We study relative performance evaluation in executive compensation when executives have private information about their ability. We assume that the joint distribution of an individual firm's profit and market movements depends on the ability of the executive that runs the firm. In the...