This paper develops an agency model in which stock-based compensation is a double-edged sword, inducing managers to exert productive effort but also inducing managers to divert valuable firm resources to misrepresent performance. We examine how the potential for manipulation affects the...

Complex investments are investments that are difficult to value in the short-term. In this paper, we analyze the incentives of a manager who is compensated based on short-term stock prices to invest in complex long-term investments. In particular, we explore how the manager's investment decision...

This article explores whether political connections are important in the United States. The article uses an original hand-collected data set on the political connections of board members of S&P 500 companies to sort companies into those connected to the Republican Party and those connected to...

Using an event study, we examine whether the stock market considers corporate lobbying to be a value-enhancing activity. On January 3, 2006, lobbyist Jack Abramoff pleaded guilty to bribing politicians, which generated intense scrutiny of lobbyists, limiting their political influence. Using this...

This paper develops a theory of board power when the board of directors collects private information about the CEOs ability to make value-increasing investments. When CEO ability is unknown ex-ante, we show that board power can be helpful in inducing information production by the board and in...

Using hand-collected data, we document the details of the ex-ante severance contracts and the ex-post separation pay given to S&P500 CEOs upon departing from their companies. We analyze what determines whether or not a departing CEO receives separation pay in excess of her severance contract. We...

Using hand-collected data, we document the details of the ex-ante severance contract and the ex-post separation pay given to S&P500 CEOs upon departing from their companies. We analyze what determines whether or not a departing CEO receives separation pay in excess of her severance contract. We...

If the price system is superior to central planning, why do firms exist with sub-economies that are very large, approximating small capitalist economies? In a principal-agent setting we compare a market, in which two principal-agent pairs trade, to a corporation in which a single principal hires...

When a firm forms a market closes. Resources that were previously allocated via the price system are allocated by managerial authority within the firm. We explore this choice of organizational form using a model of price formation in which agents negotiate prices on behalf of their principals...