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Persistent link: https://www.econbiz.de/10005477949
We consider a firm with two investment projects (divisions) each run by a manager who can provide (i) (unverifiable) information about the quality of either or both projects and (ii) (unverifiable) access to valuable resources that can enhance the cash flows of either or both projects. We then...
Persistent link: https://www.econbiz.de/10010536056
We consider the problem of motivating privately informed managers to engage in entrepreneurial activity to improve the quality of the firm's investment opportunities. The firm's investment and compensation policy must balance the manager's incentives to provide entrepreneurial effort and to...
Persistent link: https://www.econbiz.de/10010535950
Persistent link: https://www.econbiz.de/10005362693
This paper studies the relation between demographics and the equity premium in a dynamic overlapping generations (OLG) equilibrium model. Investors have both labor and investment income. The labor income and the dividend processes are correlated. Investors trade stocks for consumption purposes...
Persistent link: https://www.econbiz.de/10010535952
We develop a model of a two-division firm in which the “strong†division has,on average, higher quality investment projects than the “weak†division. We show that the firm optimally biases its project selection policy in favor of the weak division and this bias is stronger...
Persistent link: https://www.econbiz.de/10010536021
Persistent link: https://www.econbiz.de/10005478219
Our paper o�ers a minimalist model of a run on a financial market. The prime ingredient is that each risk-neutral investor fears having to liquidate after a run, but before prices can recover back to fundamental values. During the run, only the risk-averse market-making sector is willing to...
Persistent link: https://www.econbiz.de/10010535933
This paper explains why seemingly irrational overconfident behavior can persist. Information aggregation is poor in groups in which most individuals herd. By ignoring the herd, the actions of overconfident individuals ("entrepreneurs") convey their private information. However, entrepreneurs...
Persistent link: https://www.econbiz.de/10005679294
We model a run on a financial market, in which each risk-neutral investor fears having to liquidate shares after a run, but before prices can recover back to fundamental values. To avoid having to possibly liquidate shares at the marginal postrun price-in which case the risk-averse market-making...
Persistent link: https://www.econbiz.de/10005692139