We explore how the timings of compensation payment and contract termination are jointly and optimally determined in a continuous-time principal—agent model under the discretionary termination policy of investors (the principal) when the agent has loss—averse preferences. Our theoretical...

Given that an owner cannot commit to her timing strategy under a manager's hidden action, we consider (i) how the owner's timing decisions to launch a project and to replace the manager or change a project are determined, and (ii) how the optimal compensation contract for the manager is...

We develop a main bank model where the main bank decides whether or not to raise additional funds from the capital market to continue to invest in a borrowing firm when nonmain banks withdraw funds. We show that the threat of withdrawal of nonmain banks is more likely not only to force the main...

We consider the role of the nonrecourse financing of securitization by a financial institution (FI). Our model suggests that even though the FI has the opportunity to provide liquidity support afterward, it is optimal for the FI to use the nonrecourse financing of securitization initially,...

This paper considers the role of equity transfer to strategic alliance partners in mitigating the moral hazard problem that occurs if a participating firm faces some possibility of reallocating a part of the resources devoted to the joint project of the strategic alliance or retreating from the...

We examine renegotiation in a double moral hazard model with an ex ante budget balancing constraint when both the principal and the agent are allowed to make a renegotiation offer even though the principal proposes an initial contract. Under a belief restriction, any perfect-Bayesian equilibrium...