The theory of investment and growth of firms has been an important source of stochastic control problems in economics and management science. The issue of optimal management contract under the constraint that a CEO can depart to pursue an outside option ("managerial limited commitment") has been...

Ai and Li [2015] introduced a problem at the interface of the neoclassical investment and dynamic contract theories. Specifically, the authors consider the optimal design of a contract that provides sufficient incentives to the management for it to implement the shareholder’s investment plan...