TITLE

Ordinary Shares and Managers

AUTHOR(S)
Strausz, Roland
PUB. DATE
January 2006
SOURCE
Journal of Economics;Jan2006, Vol. 87 Issue 1, p1
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
We argue that ordinary shares undermine any inherent commitment of its holders to resist renegotiating away ex post inefficiencies. Yet, in a dynamic adverse selection problem, such ex post inefficiencies are optimal from an ex ante point of view. We show that shareholders may use a manager in combination with a golden parachute (managerial severance payments) as a commitment device not to renegotiate ex post.
ACCESSION #
19500156

 

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