This paper presents a DSGE model with banks that face moral hazard in management. Banks receive demand deposits and fund investment projects. Banks are subject to potential withdrawals by depositors which may force them into early liquidation of their investments. The likelihood of this...

The paper offers a new explanation for the widely observed use of redeemable and convertible preferred stock in venture capital finance. Redeemable and convertible preferred stocks can be used to endogenously allocate cash flow and control rights as a function of the state of nature, the...

Social insurance programs typically comprise sick leave insurance. An important policy parameter is how the cost of sick leave are shared between workers, firms, and the social security system. We show that this sharing rule affects not only absence behavior, but also workers' subsequent health....

We develop a stylized principal-agent model with moral hazard and adverse selection to provide a unified framework for understanding some of the most salient features of the recent physician payment reform in Ontario and its impact on physician behavior. These features include: (1) physicians...

We study entrepreneurs’ behavioral responses of effort (moral hazard) to avoid business failure.This is done in the context of an unemployment insurance scheme for self-employed, wherewe estimate how much of the transition probability to unemployment can be causally attributedto being insured....