We analyze a two-period agency problem with limited liability and non-verifiable information. The principal commits to a dynamic bonus pool comprising a fixed total payment that may be distributed over time to the agent and a third party. We find that the optimal two-period contract features...

This paper presents a theoretical framework for valuation, investment decisions, and performance measurement based on a nonstandard theory of residual income. It is derived from the notion of “unrecovered” capital, which is here named “lost” capital because it represents the capital...