Executive Effort and Selection of Risky Projects
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.
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): 17 (1986)
Issue (Month): 1 (Spring)
|Contact details of provider:|| Web page: http://www.rje.org |
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|
When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:17:y:1986:i:spring:p:77-88. 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: ()
If references are entirely missing, you can add them using this form.