importance is reviewed. Owing to the intangible nature of their investment, asymmetric-information and moral-hazard, these firms … policies to bring the cost of financing innovation more in line with the level that would prevail in the absence of market …

We present a dynamic general equilibrium model with heterogeneous firms. Owners of the firms delegate investment … decisions to managers, whose consumption and investment are private information. We solve the optimal incentive compatible … pattern of the relationships between firm size and firms' investment and dividend policies …