Overinvestment in certain firms or sectors induced by corporate fraud, where informed insiders strategically manipulate outside investors' beliefs by exaggerating financial performance and economic prospects, has been endemic historically and has recently attracted much attention. We present a...

We theoretically and empirically examine the role of international takeover markets in curtailing dominant shareholder moral hazard. In our framework, active international takeover markets provide incentives for firms with higher potential value-added from acquisitions to reduce agency risk from...

We examine, both theoretically and empirically, top-management compensation in the presence of agency conflicts when shareholders have delegated governance responsibilities to a self-interested Board of Directors (BOD). We develop a theoretical framework that explicitly incorporates the BOD as a...

We construct a dynamic model of firm dividend policy based on some basic ingredients of the behavioral theory of the firm, in particular, uncertainty avoidance and sequential decision-making by self-seeking managers. We characterize the optimal dividend policy and show that comparative statics...

Recent corporate governance reforms focus on board independence and encourage equity ownership by directors. We analyze the efficacy of these reforms in a model where both adverse selection and moral hazard exist at the level of the firm's management. Delegating governance to the board improves...

We analyze a general equilibrium model where production shocks are unobservable and there is structural uncertainty regarding investment risk because the volatility of the production shocks is unknown. Higher investment generally accelerates learning on the unknown parameter, but the dynamic...

The agency theory of the firm implies that executive incentive compensation and corporate investment policies are endogenously determined. We estimate jointly the relationship between long-term corporate investment and CEO incentive compensation structure, while considering the strength of...

Building on the managerial entrenchment literature, we develop and test a novel perspective on payout policy that integrates the influence of internal governance mechanisms, investment opportunities, management compensation, and monitoring by large shareholders. Our study incorporates both...

This paper addresses the class of generalized agency problems: situations in which adverse selection and moral hazard are jointly present. The complexity of the problem is increased by the interactions between the incentives associated with both types of private information. We present a...

This paper develops a framework for the empirical analysis and quantitative modeling of firm dividends viewed as discrete stochastic processes. The framework, built around the concept of sojourn intervals - the length of time that dividends remain unchanged - is first used to identify a number...