Unlike conglomerates in the U.S., where investment flows may be distorted due to power struggles (Rajan, Servaes, and Zingales (2000)), we find that diversified business groups in India, on average, invest efficiently. Our analysis controls for the possibility of tunneling (Bertrand, Mehta, and...

Achieving success often requires persistent effort. We study the effectiveness of two reward mechanisms, all-or-nothing and piece-rate, to incentivize full completion of repeated tasks over time. Our theoretical analysis shows that exogenously imposing the all-or-nothing mechanism can be...

Several experimental studies have demonstrated the importance of non-monetary preferences in determining agents' response to control and delegation when monetary incentives between agents and principals are not aligned, but little is known about how such preferences influence the principle agent...

We study a setting wherein a divisional manager undertakes personally costly effort to improve the profitability of an investment project. The manager's choice of innovation effort is subject to a holdup problem because of the ex post opportunism on the part of headquarters. We analyze and...

We characterize the optimal dynamic mechanism for capital budgeting and managerial compensation. The division manager privately observes the project productivity at each point in time as well as an initial signal that governs the productivity evolution. We show that the optimal allocation can be...