This article examines the incentives of executives to adopt risky projects. The agency problem considered is that of motivating the executive to expend effort to generate information about the profitability of projects and to select the "best" project conditional upon the information that his effort generates. We show that the executive and the principal will not always agree regarding which project is best. We provide conditions under which this conflict of interest leads (from the principal's perspective) to either an underinvestment or an overinvestment in risky projects.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 17 (1986) Issue (Month): 1 (Spring) Pages: 77-88 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)