A large shareholder who undertakes costly effort to improve a firm's dividends faces a tradeoff. Selling shares will likely lower the share price (as the market anticipates a reduction in effort), while holding the shares implies a less diversified investment portfolio. Moreover, in a dynamic...

This paper proposes a dynamic stochastic general equilibrium (DSGE) model for the Serbian economy. It is a modification of the existing models of Goodhart, Osorio and Tsomocos (2009) and Martinez and Tsomocos (2012). The model introduces important features of the Serbian economy, financial...

This paper analyzes optimal loan interest rate contracts under conditions of risky, symmetric information for one-period (static) and multi-period (dynamic) models. The optimal loan interest rate depends upon the volatility of, and co-variation among the market interest rate, borrower...

Executive compensation packages are often valued in an inconsistent manner: while employee stock options (ESOs) are typically valued ex-ante, i.e., before uncertainties are resolved, cash bonuses are valued ex-post, i.e., by discounting the realized cash grants. Such a lack of consistency can,...

We study financial markets in which both rational and overconfident agents coexist and make endogenous information acquisition decisions. We demonstrate the following irrelevance result: when a positive fraction of rational agents (endogenously) decides to become informed in equilibrium, prices...

We study a novel class of noisy rational expectations equilibria in markets with large number of agents. We show that, as long as noise (liquidity traders, endowment shocks) increases with the number of agents in the economy, the limiting competitive equilibrium is well-defined and leads to...

The objective of this paper is to provide a rational to the behavior of quot;large shareholdersquot; and their role in the different stages of the life of a corporation. In this paper I analyze dynamics of ownership stakes of risk-averse corporate insiders by constructing a multi-period,...

Our paper develops a theoretical framework for analyzing optimal loan interest rate contracts under conditions of risky, symmetric information. We obtain a series of closed form solutions for one-period (static) and multi-period (dynamic) optimal contracts. The optimal design for loan interest...