In this Paper we use agency theory to study the active role of the CEO in the formulation of corporate strategy. We allow the agent (CEO) to play a role in defining the parameters of the agency problem, in an incomplete contracting model in which the agent can be rewarded based only on financial...

This paper develops a simple model of sovereign debt in which defaulting nations are excluded from capital markets and regain access by making partial repayments. This implication of the model is consistent with the historical evidence that defaulting countries return to international loan...

The dynamic behavior of security prices is studied in a setting where two agents trade strategically and learn over time from market prices. The model introduces an information structure that is intended to capture the notion that information is difficult to interpret. Strategic interaction and...

Shareholders have imperfect ontrol over the decisions of the management of a firm. We integrate a widely accepted version of the separation of ownership and control -- Jensen's (1986) free cash flow theory--into a dynamic equilibrium model and study the effect of imperfect corporate control on...