Testing Agency Theory with Entrepreneur Effort and Wealth

Marianne P. Bitler (), Tobias J. Moskowitz and Annette Vissing-Jørgensen

Journal of Finance, 2005, vol. 60, issue 2, pages 539-576

Abstract: We develop a principal-agent model in an entrepreneurial setting and test the model's predictions using unique data on entrepreneurial effort and wealth in privately held firms. Accounting for unobserved firm heterogeneity using instrumental-variables techniques, we find that entrepreneurial ownership shares increase with outside wealth and decrease with firm risk; effort increases with ownership; and effort increases firm performance. The magnitude of the effects in the cross-section of firms suggests that agency costs may help explain why entrepreneurs concentrate large fractions of their wealth in firm equity. Copyright 2005 by The American Finance Association.

Date: 2005
View citations in EconPapers

Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6261.2005.00739.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bla:jfinan:v:60:y:2005:i:2:p:539-576

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

Journal of Finance is edited by Robert F. Stambaugh

More articles in Journal of Finance from American Finance Association
Contact information at EDIRC.
Series data maintained by Christopher F. Baum ().