We present a novel source of disagreement grounded in decision theory: ambiguity aversion. We show that ambiguity aversion generates endogenous disagreement between a firm's insider and outside shareholders, creating a new rationale for corporate governance systems. In our paper, optimal...

This paper presents a rational expectations model of optimal executive compensation in a setting where managers are in a position to manipulate short-term stock prices, and managers' propensity to manipulate is uncertain. Stock-based incentives elicit not only productive effort, but also costly...

The purpose of this Paper is to study the determinants of the concentration of ownership in a privatized, regulated firm. The discussion illustrates some aspects of the costs and benefits of different corporate systems. Privatized utilities are large firms with professional management: there is...

This Paper evaluates the primary mechanisms for changing management or obtaining control in publicly traded corporations with dispersed ownership. Specifically, we analyse and compare three mechanisms: (1) proxy fights (voting only); (2) takeover bids (buying shares only); and (3) a combination...

We present a model of succession in a firm controlled and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on how much, if any, of the shares to float on the stock exchange. We assume that a professional is a better...

This Paper analyses the effects of dividend taxation on corporate behaviour using the large tax cut on individual dividend income enacted in 2003. Using data spanning 1980 to 2004-Q2, we document a sharp and widespread surge in dividend payments following the tax cut, along several dimensions....

This Paper empirically investigates the decisions of US publicly traded firms on where to incorporate. We study the features of states that make them attractive to incorporating firms and the characteristics of firms that determine whether they incorporate in or out of their state of location....

This Paper develops an account of the role and significance of rent extraction in executive compensation. Under the optimal contracting view of executive compensation, which has dominated academic research on the subject, pay arrangements are set by a board of directors that aims to maximize...

This paper provides empirical evidence consistent with the facts that (1) social networks may strongly affect board composition and (2) social networks may be detrimental to corporate governance. Our empirical investigation relies on a unique dataset on executives and outside directors of...

In this Paper we analyse the effects of information leakage on the incentives to innovate in firms. We analyse a situation in which an employee in a firm is inspired with a new idea for a product. In a framework in which Intellectual Property Rights on ideas are absent, we analyse the...