We study a competitive model in which managers differ in ability and choose unobservable effort. Each firm chooses its size, how able a manager is to hire, and managerial compensation. The model can be considered an amalgam of agency and Superstars, where optimizing incentives enhances the...

Prior research suggests that executive option grants that do not quickly vest provide managers with better incentives to pursue long-term, instead of short-term, objectives. Previous research also suggests that the pursuit of long-term objectives could be undermined by the risk of early...

Many directors are not simply insiders or outsiders. For example, an officer of a supplier is neither independent nor captive of management. We use a spatial model of board decision-making to analyze bargaining among multiple types of directors. Board decisions are modeled using a new solution...

Agency models of multiple tasks typically assume independent outcomes. We show that correlation between outcomes can generate both economy and diseconomy of scale through diversification and competition effects. Additionally, the optimal compensation is non-monotone if the correlation is large.

This paper revisits the question of whether CEO compensation practices are in keeping with those justified by agency theory. We develop and analyze a new panel Tobit model, estimated by modern Bayesian methods, in which the heterogeneity of covariate effects across firms is modeled in a...

Disclosure by firms would seem to reduce investment inefficiency by reducing informational asymmetry. However, the impact of disclosure is endogenous and depends on incentives within the firm. Given optimal renegotiation-proof contracts, disclosing only accepted contracts does not solve the...