We study a model of "information-based entrenchment" in which the CEO has private information that the board needs to make an efficient replacement decision. Eliciting the CEO's private information is costly, as it implies that the board must pay the CEO both higher severance pay and higher...

The continuous-time principal-agent model with exponential utility developed by Holmström and Milgrom (1987) and generalized by Schättler and Sung (1993, 1996) and Sung (1995) admits a simple closed-form solution: The second-best sharing rule is linear in output. Unfortunately, the first-best...

Our paper evaluates recent regulatory proposals mandating the deferral of bonus payments and claw-back clauses in the financial sector. We study a broadly applicable principal agent setting, in which the agent exerts effort for an immediately observable task (acquisition) and a task for which...

This paper provides a complete characterization of optimal contracts in principal-agent settings where the agent's action has persistent effects. We model general information environments via the stochastic process of the likelihood-ratio. The martingale property of this performance metric...