Payout Policy, Capital Structure, and Compensation Contracts When Managers Value Control
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.
If you experience problems downloading a file, check if you have the proper application to view it first. 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): 6 (1993)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.|
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC
|Order Information:||Web: http://www4.oup.co.uk/revfin/subinfo/|
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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.