In the standard principal-supervisor-agent model with collusion, Tirole (1986) shows that employing a supervisor is profitable for the principal if the supervisor's signal of the agent's cost of production is 'hard' (i.e., verifiable but hideable). Anecdotal evidence suggests that information is...

The paper shows that, as owners accumulate larger stakes and hence become less risk-tolerant, their incentives to monitor management are attenuated because monitoring shifts some of the firm's risk from management to owners. This counterbalances the positive effect which more concentrated...