The literature analyzing games where some players have private information about their "types" is usually based on the duality of "good" and "bad" types (GB approach), where "good" type denotes the type with better quality. In contrast, this paper analyzes a signalling game without types...

This paper analyzes the debt-equity choice for financing a two-stage investment when a firm's insiders have private information about the firm's expected earnings. When private information is one-dimensional (for example when short-term earnings are common knowledge while long-term earnings are...

This paper analyzes the links between cash flow rights, control rights and property rights in situations where a firm's security holders can manipulate earnings (intertemporal substitution). It is shown that the allocation of these rights a¤ects the incentives of claimholders when intertemporal...

We analyze a model with two-dimensional asymmetric information where the employer has better information about the firm's earnings potential and the employee is subject to moral hazard. The employee's contract consists of an annual bonus and stock options. We focus on two issues: how different...

This note provides an explanation for why tax rates on capital gains are usually lower than ordinary income tax rates based on manager's agency problem related to "empire-building" or the underinvestment problem.

Existing literature usually considers earnings manipulation to be a negative social phenomenon. We argue that earnings manipulation can be a part of the equilibrium relationships between firm's…insiders and outsiders. We consider an optimal contract between an entrepreneur and an investor where...

In recent years financing through the creation of an independent project company or financing by non-recourse debt has become an important part of corporate decisions. Shah and Thakor (JET, 1987) argue that project financing can be optimal when asymmetric information exists between firm's...