Giat, Yahel; Hackman, Steve T.; Subramanian, Ajay - In: Review of Financial Studies 23 (2010) 4, pp. 1360-1404
We develop a structural model to investigate the effects of asymmetric beliefs and agency conflicts on dynamic principal--agent relationships. Optimism has a first-order effect on incentives, investments, and output, which could reconcile the private equity puzzle. Asymmetric beliefs cause...