Showing 1 - 10 of 61
Disclosure and monitoring policy are studied, where disclosure relates to information about the monitoring system. A moral hazard model is presented where employee monitoring occurs with some exogenous probability and the owner privately learns whether he will be monitoring before the employee...
Persistent link: https://www.econbiz.de/10014197463
We present an algorithm that merges a certainty-equivalence framework with the least-squares Monte Carlo algorithm to obtain the executive stock option (ESO) value for a risk-averse and undiversified agent. We account for the difference between executive's value and firm cost of the ESO. We show...
Persistent link: https://www.econbiz.de/10012953215
A performance standard's horizon is the time given to achieve the standard. Horizons vary considerably in practice, and the goal-setting literature provides mixed evidence on whether short or long horizons are more effective at eliciting effort from workers. I predict and find that uncertainty...
Persistent link: https://www.econbiz.de/10012854791
We test the implications of ambiguity aversion in a principal-agent problem with multiple agents. Models of ambiguity aversion suggest that, under ambiguity, comparative compensation schemes may become more attractive than independent wage contracts. We test this by presenting agents with a...
Persistent link: https://www.econbiz.de/10009545983
We test the implications of ambiguity aversion in a principal-agent problem with multiple agents. When output distributions are uncertain, models of ambiguity aversion suggest that tournaments may become more attractive than independent wage contracts, in contrast to the case where output...
Persistent link: https://www.econbiz.de/10009230345
This paper studies the contracting choices between an entrepreneur and venture capital investors in a portfolio context. We rely on the mean-variance framework and derive the optimal choices for an entrepreneur with and without the presence of different kinds of venture capitalists. In...
Persistent link: https://www.econbiz.de/10008753443
We consider Merton's version of the Solow model Merton (1975), where capital per labor is assumed to follow the diffusion process: dk(t)=[sf(k(t))-(n lambda-sigma2)k(t)]dt sigmak(t)dW(t), with constant per capital savings rate s. Merton defined a golden rule in this context as one for which...
Persistent link: https://www.econbiz.de/10014046998
Previous literature on cash management has revealed that firms hoard cash to protect themselves against external financing constraints that might limit future capital budgeting policies. In a theoretical model based on this finding, we analyze how investors' attitude towards uncertain investment...
Persistent link: https://www.econbiz.de/10013007548
A main prediction of agency theory is the well known risk-incentive trade-off. Incentive contracts should be found in environments with little uncertainty and for agents with low degrees of risk aversion. There is an ongoing debate in the literature about the first trade-off. Due to lack of...
Persistent link: https://www.econbiz.de/10010333738
The French "2010 Household Wealth Survey" includes an experimental module that makes it possible to measure risk aversion in an objective manner. Using this survey, we analyse workers’ attitudes towards financial participation with respect to their attitudes towards risk.
Persistent link: https://www.econbiz.de/10010783685