Managerial compensation and agency problems in corporate governance and financial intermediation / Jun Qian.

Format:

Book

Manuscript

Microformat

Thesis/Dissertation

Author/Creator:

Qian, Jun.

Contributor:

Allen, H. Franklin, advisor.

University of Pennsylvania.

Language:

English

Subjects (All):

Penn dissertations--Economics.

Economics--Penn dissertations.

Local Subjects:

Penn dissertations--Economics.

Economics--Penn dissertations.

Physical Description:

x, 138 pages ; 29 cm

Production:

2000.

Summary:

In the first chapter, Option-like Contracts for Innovation and Production, we model how firms motivate their risk-averse managers to evaluate new investment projects as well as to manage assets-in-place. We first consider a two-agent model: an Innovator whose effort produces better information on risky projects; and a Producer whose effort increases the mean of firm value but he faces uncertainty in his productivity. We derive optimal contracts for them and show that under mild conditions they exhibit convexity. We next demonstrate that when a single agent is assigned both tasks, his contract is in general convex, with the degree of convexity increasing in the agent's importance in managing the new project. We interpret the convexity in the optimal contracts as "option-like" compensation.

In the second chapter, Risk Aversion, Target Price Formation and Toehold Acquisitions, we examine the empirical puzzle of zero or small acquisition of the seemingly profitable toehold by a risk-averse raider before a tender offer. Facing the possibility of the target's defense and subsequent failure of the tender offer, he chooses the size of the toehold to maximize his ex ante expected utility. With endogenous pre-tender offer target price formation in the market, there is an unique rational expectation equilibrium in the basic model in which the bidder acquires a zero toehold. We then consider two cases where a positive toehold is optimal for the raider.

Finally, in the third chapter, The Development of Financial Intermediation and Real Effects of Capital Account Liberalization, we consider lending and investment under asymmetric information in an emerging economy. We examine the impact of opening the capital account on both aggregate output level and the structure of lending arrangements. Financial intermediaries mitigate the moral hazard problem in investment choice through costly monitoring all projects and liquidating risky, negative NPV projects. Depending on the quality of the monitoring technology, opening the capital account may strengthen or weaken the role of financial intermediaries. Our results suggest situations where limiting the capital inflow or outflow may be necessary to avoid an aggregate risk shift and the collapse of the financial intermediation sector.

Notes:

Supervisor: H. Franklin Allen.

Thesis (Ph.D. in Economics) -- University of Pennsylvania, 2000.

Includes bibliographical references.

Local Notes:

University Microfilms order no.: 99-65549.

OCLC:

244971172