Managers of private entrepreneurial firms face obstacles in raising capital both in placing a value on a firm and conveying value to investors. These problems are exacerbated when the firm is small, has limited assets (except for human capital) and has yet to have a lead product. In such cases...

Managers of private entrepreneurial firms face obstacles in raising capital both in placing a value on a firm and conveying value to investors. These problems are exacerbated when the firm is small, has limited assets (except for human capital) and has yet to have a lead product. In such cases...

Subjective evaluations are widely used, but call for different contracts from classical moral-hazard settings. Previous literature shows that contracts require payments to third parties. I show that the (implicit) assumption of deterministic contracts makes payments to third parties necessary....

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...

An essential ingredient in models of career concerns is ex ante uncertainty about an agent's type. This paper shows how career concerns can arise even in the absence of any such ex ante uncertainty, if the unobservable actions that an agent takes influence his future productivity. By...

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...

We present a sorting model in which workers with greater ability and greater risk tolerance move into performance pay jobs and contrast it with the classic agency model of performance pay. Estimates from the German Socio-Economic Panel confirm testable implications drawn from our sorting model....

We present a sorting model in which workers with greater ability and greater risk tolerance move into performance pay jobs and contrast it with the classic agency model of performance pay. Estimates from the German Socio-Economic Panel confirm testable implications drawn from our sorting model....

This paper examines the implications of corporate manager's tendency to promote her private benefits by realizing inefficient investments that incurs a cost for shareholders in terms of lost shareholder value. Under reasonable conditions, we derive an expression for such a loss and propose a...

We study the interaction between leverage, employment structure and compensation policies within firms.