Consider a firm owned by shareholders with heterogeneous beliefs and run by a manager. Shareholders can trade contingent claims in a complete asset market. The manager is given a contract so that at equilibrium she chooses the plan preferred by shareholders. We show that the contract should...

We explore how the separation between ownership and control affects firm productivity. Using Finnish administrative data on the universe of limited liability firms, we document a substantial increase in firm productivity when the CEO obtains majority ownership or when the majority owner becomes...