This note provides an explanation for why tax rates on capital gains are usually lower than ordinary income tax rates based on manager's agency problem related to "empire-building" and the underinvestment problem

This note provides an explanation for why tax rates on capital gains are usually lower than ordinary income tax rates based on manager's agency problem related to "empire-building" and the underinvestment problem

In recent years financing through the creation of an independent project company or financing by non-recourse debt has become an important part of corporate decisions. Shah and Thakor (JET, 1987) argue that project financing can be optimal when asymmetric information exists between firm's...

We consider an optimal contract between an entrepreneur and an investor, where the entrepreneur is subject to a double moral hazard problem (one being the choice of production effort and the other being earnings manipulation). Since the entrepreneur cannot entirely capture the results of his...