Dynamic financial contracting with persistent private information

• 成果类型: Article
• 署名作者: Fu, Shiming; Krishna, R. Vijay
• 署名单位: Shanghai University of Finance & Economics; State University System of Florida; Florida State University
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12275
• 发表日期: 2019
• 页码: 418-452
• 关键词: Mechanism design; security design; continuous-time; AGENCY; firm; INVESTMENT; constraints; BEHAVIOR; income

摘要

We study a dynamic agency model where the agent privately observes the firm's cash flows that are subject to persistent shocks. We characterize the policy dynamics and implement the optimal contract by financial securities. Because bad performance distorts investors' beliefs downward, the agent has less incentive to misrepresent information. The agent's compensation is less than what he can divert and is convex in performance. As private information becomes more persistent, (i) the agent is compensated more by stock options; (ii) firm credit limits vary more with history, dropping after bad performance; (iii) the firm is financially constrained for longer time.