AsianFA Optimal Short-Termism

Tak-Yuen Wong    Dirk Hackbarth, Alejandro Rivera
28 Mar 2018
Category: Corporate Finance

Country or region: Asia Pacific (Overall)

This paper studies incentives in a dynamic contracting framework of a levered firm. In particular, the manager selects long-term and short-term efforts, while shareholders choose initially optimal leverage and ex-post optimal default policies. There are three results. First, shareholders trade off the benefits of short-termism (current cash flows) against benefits ......

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