IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v6y1993i4p911-33.html
   My bibliography  Save this article

Payout Policy, Capital Structure, and Compensation Contracts When Managers Value Control

Author

Listed:
  • Chang, Chun

Abstract

The optimal contract between managers and investors is endogenously derived when managers have preferences for both monetary compensation and corporate resources under their control. When the optimal payout is privately known to managers, they can be induced to make payouts by linking their compensation to the payout. Public equity is a claim on this discretionary payout. If investors can obtain new information about the firm's optimal payout level, it can be utilized by transferring the control from management to investors. The new information allows the firm to achieve a more efficient allocation through recontracting. We show that the new information will be obtained if and only if the payout falls below a promised level. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Suggested Citation

  • Chang, Chun, 1993. "Payout Policy, Capital Structure, and Compensation Contracts When Managers Value Control," The Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 911-933.
    • Handle: RePEc:oup:rfinst:v:6:y:1993:i:4:p:911-33
    as

    Download full text from publisher

    File URL: http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/08939454
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tse-Chun Lin & Qi Liu & Bo Sun, 2015. "Contracting with Feedback," International Finance Discussion Papers 1143, Board of Governors of the Federal Reserve System (U.S.).
    2. Erwan Morellec & Boris Nikolov & Norman Schürhoff, 2012. "Corporate Governance and Capital Structure Dynamics," Journal of Finance, American Finance Association, vol. 67(3), pages 803-848, June.
    3. Jonathan B. Berk & Richard Stanton & Josef Zechner, 2010. "Human Capital, Bankruptcy, and Capital Structure," Journal of Finance, American Finance Association, vol. 65(3), pages 891-926, June.
    4. George Kanatas & Jianping Qi, 2004. "Dividends and Debt with Managerial Agency and Lender Holdup," Management Science, INFORMS, vol. 50(9), pages 1249-1260, September.
    5. Xu, Peng, 1997. "Executive Salaries as Tournament Prizes and Executive Bonuses as Managerial Incentives in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 11(3), pages 319-346, September.
    6. Ramona Westermann, 2018. "Measuring Agency Costs over the Business Cycle," Management Science, INFORMS, vol. 64(12), pages 5748-5768, December.
    7. Ouidad Yousfi, 2009. "Leveraged Buy Out: Dynamic agency model with write-off option," Working Papers hal-04140881, HAL.
    8. Ouidad Yousfi, 2009. "Leveraged Buy Out: Dynamic agency model with write-off option," EconomiX Working Papers 2009-13, University of Paris Nanterre, EconomiX.
    9. Joachim Jungherr, 2012. "Financial Amplification, Executive Compensation, and Optimal Capital Structure," 2012 Meeting Papers 933, Society for Economic Dynamics.
    10. Aggarwal, Rajesh K. & Samwick, Andrew A., 2006. "Empire-builders and shirkers: Investment, firm performance, and managerial incentives," Journal of Corporate Finance, Elsevier, vol. 12(3), pages 489-515, June.
    11. Ouidad Yousfi, 2010. "Exit routes in LBO projects," Working Papers hal-04140925, HAL.
    12. Douglas, Alan V. S., 2001. "Managerial replacement and corporate financial policy with endogenous manager-specific value," Journal of Corporate Finance, Elsevier, vol. 7(1), pages 25-52, March.
    13. Nalinaksha Bhattacharyya & Amin Mawani & Cameron Morrill, 2008. "Dividend payout and executive compensation: theory and evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 48(4), pages 521-541, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:6:y:1993:i:4:p:911-33. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.