Equilibrium CEO contract with belief heterogeneity
Elyès Jouini
- Fonction : Auteur
- PersonId : 6654
- IdHAL : elyes-jouini
- ORCID : 0000-0003-2506-1726
- IdRef : 034263209
Résumé
Consider a firm owned by shareholders with heterogeneous beliefs and run by a manager who chooses random production plans. Shareholders do not observe the chosen plan but only its realization. The financial market consists of assets contingent on production realizations. A contract for the manager specifies her compensation as a function of the firm's production and possibly some restrictions to trade in the financial market. Shareholders are unrestricted. We define a concept of equilibrium between the manager and shareholders such that the equilibrium production plan is unanimously preferred by the manager and the shareholders, markets clear and the manager has no incentive to cheat. We first analyze the properties of such equilibria and in particular show that the contract should restrict the manager from trading. We next provide a framework where such equilibria exist. We lastly study the properties of equilibrium compensations when shareholders have beliefs that can be ranked in terms of optimism towards the equilibrium plan. Specific attention is given to their departure from linear compensations.
Domaines
Economies et financesFormat du dépôt | Notice |
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Type de dépôt | Article dans une revue |
Résumé |
en
Consider a firm owned by shareholders with heterogeneous beliefs and run by a manager who chooses random production plans. Shareholders do not observe the chosen plan but only its realization. The financial market consists of assets contingent on production realizations. A contract for the manager specifies her compensation as a function of the firm's production and possibly some restrictions to trade in the financial market. Shareholders are unrestricted. We define a concept of equilibrium between the manager and shareholders such that the equilibrium production plan is unanimously preferred by the manager and the shareholders, markets clear and the manager has no incentive to cheat. We first analyze the properties of such equilibria and in particular show that the contract should restrict the manager from trading. We next provide a framework where such equilibria exist. We lastly study the properties of equilibrium compensations when shareholders have beliefs that can be ranked in terms of optimism towards the equilibrium plan. Specific attention is given to their departure from linear compensations.
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Titre |
en
Equilibrium CEO contract with belief heterogeneity
|
Auteur(s) |
Milo Bianchi
1
, Rose-Anne Dana
2, 3
, Elyès Jouini
4, 3
1
TSE-R -
Toulouse School of Economics
( 1002422 )
- Manufacture de Tabacs, 21 allées de Brienne 31000 Toulouse
- France
2
Université Paris Dauphine-PSL
( 300302 )
- Place du Maréchal de Lattre de Tassigny
75775 PARIS Cedex 16
- France
3
CEREMADE -
CEntre de REcherches en MAthématiques de la DEcision
( 60 )
- Place du Maréchal de Lattre de Tassigny 75775 - Paris Cedex 16
- France
4
PJSE -
Paris Jourdan Sciences Economiques
( 578027 )
- 48 boulevard Jourdan 75014 Paris
- France
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Public visé |
Scientifique
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Langue du document |
Anglais
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Nom de la revue |
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Vulgarisation |
Non
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Comité de lecture |
Oui
|
Audience |
Internationale
|
Date de publication |
2022-09
|
Volume |
74
|
Numéro |
2
|
Page/Identifiant |
505-546
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Mots-clés (JEL) |
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Projet(s) ANR |
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Domaine(s) |
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Mots-clés |
en
Heterogeneous beliefs, Asymmetric information, Manager-shareholders equilibrium
|
DOI | 10.1007/s00199-022-01440-6 |
UT key WOS | 000819343800003 |
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