Optimal Short-Termism

• 成果类型: Article
• 署名作者: Hackbarth, Dirk; Rivera, Alejandro; Wong, Tak-Yuen
• 署名单位: Boston University; Centre for Economic Policy Research - UK; European Corporate Governance Institute; University of Texas System; University of Texas Dallas; National Tsing Hua University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4139
• 发表日期: 2022
• 页码: 6477-6505
• 关键词: capital structure; CONTRACTING; multitasking

摘要

This paper develops a dynamic contracting (multitasking) model of a levered firm. In particular, the manager selects long-term and short-term efforts, and shareholders choose optimal debt and default policies. Excessive short-termism ex post is optimal for shareholders because debt has an asymmetric effect: shareholders receive all gains from short-termeffort but share gains fromlong-termeffort. We find that grimgrowth prospects and shareholder impatience imply higher optimal levels of short-termism. Also, an incentive cost effect and a real option effect create nontrivial patterns for the endogenous default threshold. Finally, we quantify agency costs of excessive short-termism, which underscore the economic significance of our results.