We develop a model of financial media in which some investors only observe firm announcements that are covered by journalists. The introduction of journalists induces more informed trading by readers, but inadvertently incentivizes the manager to...Read more
This paper develops a theory of governance and inheritance within family firms based on kin altruism (Hamilton, 1964). Family members weigh the payoffs to relatives in proportion to relatedness. The theory shows that family management entails...Read more
We develop a theory of income and payout smoothing by firms when insiders know more about income than outside shareholders, but property rights ensure that outsiders can enforce a fair payout. Insiders set payout to meet outsiders? expectations...Read more
This paper forms part of the proceedings for the 6th Annual Berle Symposium (2014), which focused on Margaret Blair and Lynn Stout?s 1999 Virginia Law Review article <a href="http://ssrn.com...Read more
This paper studies the value of additional performance signals under limited liability. We show that -- contrary to the informativeness principle -- informative signals may have no value, because the payment cannot be adjusted to reflect the...Read more
This paper studies the value of more precise signals on agent performance in an optimal contracting model with endogenous effort. With limited liability, the agent's wage is increasing in output only if output exceeds a threshold, else it is zero...Read more
Holmström (1979) provides a condition for a signal to have positive value assuming the validity of the first-order approach. This paper extends Holmström's analysis to settings where the first-order approach may not hold. We provide a new...Read more
This article studies traditional and modern theories of executive compensation, bringing them together under a simple unifying framework accessible to the general-interest reader. We analyze assignment models of the level of pay, and static and...Read more
The appropriate division of authority between a company?s board and its shareholders
has been the central issue in the corporate governance debate for decades. This issue presents most vividly for defensive tactics: the extent to which the...Read more
In December 2018, a Corporate Governance Code aimed at large private companies was unveiled, the culmination of an industry-led effort in producing a set of best practices in large private companies. These standards would also facilitate...Read more
This paper presents an industry equilibrium model where firms have a choice to engage in corporate social responsibility (CSR) activities. We model CSR as an investment to increase product differentiation that allows firms to benefit from higher...Read more
This paper studies multi-agent optimal contracting with cost synergies. We model synergies as the extent to which effort by one agent reduces his colleague's marginal cost of effort. An agent's pay and effort depend on the synergies he exerts,...Read more