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The unicorn quest: Deriving empirical predictions from theory

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  • Beyer, Anne
  • Jeong, Junyoung

Abstract

We discuss Feng et al. (2024), which studies a dynamic model of delegated investment. The paper provides novel insights into the optimal contract between a principal and an agent who obtains private information about both the timing and profitability of investment opportunities. While the analytical analysis provides interesting findings, we have concerns about the validity of the paper’s empirical predictions. We extend the “conceptual” and “operational” levels of Libby boxes by adding an “analytical” level to offer a tool for assessing and developing the link between theoretical models and empirical tests.

Suggested Citation

  • Beyer, Anne & Jeong, Junyoung, 2024. "The unicorn quest: Deriving empirical predictions from theory," Journal of Accounting and Economics, Elsevier, vol. 78(2).
    • Handle: RePEc:eee:jaecon:v:78:y:2024:i:2:s0165410124000661
    DOI: 10.1016/j.jacceco.2024.101736
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    References listed on IDEAS

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    1. Erik Madsen, 2022. "Designing Deadlines," American Economic Review, American Economic Association, vol. 112(3), pages 963-997, March.
    2. Roman Inderst & Manuel Klein, 2007. "Innovation, endogenous overinvestment, and incentive pay," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 881-904, December.
    3. Feng, Felix Zhiyu & Luo, Robin Yifan & Michaeli, Beatrice, 2024. "In search of a unicorn: Dynamic agency with endogenous investment opportunities," Journal of Accounting and Economics, Elsevier, vol. 78(2).
    4. Mayer, Simon, 2022. "Financing breakthroughs under failure risk," Journal of Financial Economics, Elsevier, vol. 144(3), pages 807-848.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Delegated investment decision; Dynamic contracting; Adverse selection;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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