We provide a simple asymmetric information model showing that, in contrast to portfolio diversification arguments, there is a natural complementarity between executive options and stock ownership. Moreover, managers can be made worse off by being granted more executive options.

We consider the bias of the two-stage least squares (2SLS) estimator in linear instrumental variable regression with only one endogenous regressor. By using asymptotic expansion techniques, we approximate the 2SLS coefficient estimation bias under various scenarios regarding the number and...