When to Fire a CEO: Optimal Termination in Dynamic Contracts
The repeated agency model has been widely applied to a number of interesting and important problems in economics, though in many instances, the fact that the standard model generates transient dynamics limits the usefulness of the results obtained from the model for the simple reason that purely transient dynamc phenomena are empirically irrelevant since they cannot be systematically observed and studied. \ In this paper, we show to embed the standard long-term contracting model in an economic environment in which the inherently transient dynamics of the model are transformed into dyanmics which are stationary and ergodic. \ We then use the model to study CEO termination and issues of corporate takeover.
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- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
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- Wang, Cheng, 1997.
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Elsevier, vol. 76(1), pages 72-105, September.
- Wang, Cheng, 1997. "Incentives, CEO Compensation and Shareholder Wealth in a Dynamic Agency Model," Staff General Research Papers 5170, Iowa State University, Department of Economics.
- Wang, C., 1995. "Incentives, CEO Compensation, and Shareholder Wealth in a Dynamic Agency Model," GSIA Working Papers 1995-08, Carnegie Mellon University, Tepper School of Business.
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