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Learning, termination, and payout policy in dynamic incentive contracts
DeMarzo, Peter M.; Sannikov, Yuliy - 2016
We study a principal-agent setting in which both sides learn about future profitability from output, and the project can be abandoned/terminated if profitability is too low. With learning, shirking by the agent both reduces output and lowers the principal's estimate of future profitability. The...
Persistent link: https://www.econbiz.de/10011864825
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A Theory of Income Smoothing When Insiders Know More than Outsiders
Acharya, Viral V. - 2012
rights ensure that outside shareholders can enforce a fair payout. To avoid intervention, insiders report income consistent … income and payout process that adjust partially and over time towards a target. Insiders underproduce in an attempt not to …
Persistent link: https://www.econbiz.de/10013109095
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A Theory of Income Smoothing When Insiders Know More than Outsiders
Acharya, Viral V. - 2014
We develop a theory of income and payout smoothing by firms when insiders know more about income than outside … shareholders, but property rights ensure that outsiders can enforce a fair payout. Insiders set payout to meet outsiders …' expectations and underproduce to manage downward future expectations. The observed income and payout process are smooth and adjust …
Persistent link: https://www.econbiz.de/10013066995
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A Theory of Income Smoothing When Insiders Know More than Outsiders
Acharya, Viral V. - 2015
We develop a theory of income and payout smoothing by firms when insiders know more about income than outside … shareholders, but property rights ensure that outsiders can enforce a fair payout. Insiders set payout to meet outsiders …' expectations and underproduce to manage future expectations downward. The observed income and payout process are smooth and adjust …
Persistent link: https://www.econbiz.de/10013037491
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Optimal long-term contracting with learning
He, Zhiguo; Wei, Bin; Yu, Jianfeng; Gao, Feng - 2016
We introduce uncertainty into Holmstrom and Milgrom (1987) to study optimal long-term contracting with learning. In a dynamic relationship, the agent's shirking not only reduces current performance but also increases the agent’s information rent due to the persistent belief manipulation...
Persistent link: https://www.econbiz.de/10011557712
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Managerial Biases and Debt Contract Design : The Case of Syndicated Loans
Adam, Tim - 2018
We examine whether managerial overconfidence impacts the use of performance-pricing provisions in loan contracts (PSD). Managers with biased views may issue PSD because they consider this form of debt to be mispriced. Our evidence shows that overconfident managers are more likely to issue...
Persistent link: https://www.econbiz.de/10012940196
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CEO Contractual Protection and Debt Contracting
Chen, Xia; Cheng, Qiang; Lo, Alvis K.; Wang, Xin - 2022
CEO contractual protection, in forms of CEO employment agreements and CEO severance pay agreements, is prevalent among S&P 1500 firms. While prior research has examined the impact of these agreements on corporate decisions from shareholders’ perspective, there is little research on the impact...
Persistent link: https://www.econbiz.de/10014235938
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Inside debt and the design of corporate debt contracts
Anantharaman, Divya; Fang, Vivian W.; Gong, Guojin - In: Management science : journal of the Institute for … 60 (2014) 5, pp. 1260-1280
Persistent link: https://www.econbiz.de/10010369814
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Dynamic contracting with long-term consequences : optimal CEO compensation and turnover
Vasama, Suvi - 2016
We examine optimal managerial compensation and turnover policy in a principal-agent model in which the firm output is serially correlated over time. The model captures a learning-by-doing feature: higher effort by the manager increases the quality of the match between the firm and the manager in...
Persistent link: https://www.econbiz.de/10011550469
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The Complexity of CEO Compensation
Jarque, Arantxa - 2014
I study firm characteristics that justify the use of options or refresher grants in the optimal compensation packages for CEOs in the presence of moral hazard. I model explicitly the determination of stock prices as a function of the output realizations of the firm: Symmetric learning by all...
Persistent link: https://www.econbiz.de/10013047902