Bianchi, Milo, Dana, Rose-Anne and Jouini, Elyes (2022) Shareholder heterogeneity, asymmetric information, and the equilibrium manager. Economic Theory, vol. 73 (n°4). pp. 1101-1134.

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Identification Number : 10.1007/s00199-021-01349-6


Consider a Örm owned by shareholders with heterogeneous beliefs and discount rates who delegate to a manager the choice of a production plan. The shareholders and the manager can trade contingent claims in a complete asset market. Shareholders cannot observe the chosen production plan and design a compensation scheme so that at equilibrium the manager chooses the plan they prefer and reveals it truthfully. We show that at equilibrium i) proÖt is maximized, ii) the manager gets a constant share of production, iii) she has no incentive to trade. We then show that such equilibrium exists if and only if the manager has the same belief and discount rate as the representative shareholder. This allows us to characterize the required characteristics of the manager as a function of shareholdersí characteristics.

Item Type: Article
Language: English
Date: July 2022
Refereed: Yes
Place of Publication: Berlin
Uncontrolled Keywords: heterogeneous shareholders, asymmetric information, manager-shareholders equilibrium
JEL Classification: D24 - Production; Cost; Capital and Total Factor Productivity; Capacity
D51 - Exchange and Production Economies
D53 - Financial Markets
D70 - General
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 25 Mar 2021 10:04
Last Modified: 13 Jan 2023 08:47
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