We present a dynamic general equilibrium model with heterogeneous firms. Owners of the firms delegate investment … decisions to managers, whose consumption and investment are private information. We solve the optimal incentive compatible … pattern of the relationships between firm size and firms' investment and dividend policies …

This paper studies the effects of changes in uncertainty on optimal leverage and investment in a dynamic firm … the larger shocks. Initially deleveraging leads to a drop in investment. Investment recovers as entrepreneurs build up net … optimal leverage and investment dynamics. Financial innovation amplifies the effects of uncertainty shocks …

This essay surveys the body of research that asks how the efficiency of corporate investment is influenced by problems … that the marginal return to investment in firm i is the same as the marginal return to investment in firm j ? Second, do … capital budgeting process get within-firm allocations right, so that the marginal return to investment in firm i ’s division A …

entrepreneur cannot entirely capture the results of his effort, investment is below the optimal level and production effort is … production is unsuccessful. Ex-ante, this provides an incentive for the entrepreneur to increase investment and improve effort …