Without sacrificing tractability, we analyze the effect of fat-tailed events such as catastrophes on the optimal compensation contract between a principal and an agent. The optimal contract depends on all the moments and not just the variance.

According to Arrow and Lind (1970), the more shareholders participate in an investment and the more dispersed the ownership structure becomes, the lower the discount rate of an individual investor is due to risk sharing. This implies that the valuation of the investment should increase....

In this article I demonstrate the relationship between research and development expenditure and firm productivity. Using data envelopment, I construct a measure of the firm-level distance from the industry-wide productivity frontier. Firms <italic>ex ante</italic> further from the productivity frontier invest...