Renegotiation-proof Contracting, Disclosure, and Incentives for Effcient Investment
In general, disclosure by firms would seem to be valuable for reducing the information asymmetry that is a cause of investment inefficiency in firms. However, the effect of disclosure is subtle, especially when the link to firm value is endogenous and depends on incentives within the _rm. We analyze various disclosure regimes and determine which ones are effective in eliminating the Myers-Majluf inefficiency in a model with optimal renegotiation-proof contracts. Disclosing only accepted contracts does not solve the Myers-Majluf problem, but either full transparency of all compensation negotiations or additional disclosure of a forward-looking announcement does. The model is robust to the presence of renegotiation in equilibrium and is also robust to changing who offers any renegotiation. The analysis helps to illuminate optimal disclosure regulation. For example, it tells us that allowing forward-looking disclosure is beneficial provided we are in an environment that produces the optimal contract, which gives the manager an incentive for truth- telling.
optimal contracting renegotiation-proofness compensation disclosure forward-looking announcement
Nina Baranchuk Philip H.Dybvig Jun Yang
School of Management,University of Texas-Dallas,P.O.BOX 830688 SM31,Richardson, TX 75083-0688, USA Washington University in Saint Louis,2348 S 9TH ST,SAINT LOUIS MO 63104-4238,USA Kelley School of Business,Indiana University,1309 East Tenth Street,Bloomington,IN 47405-1701,USA
国际会议
成都
英文
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）