Moral hazard and dynamics of insider ownership stakes

Branko Urosevic

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: In this paper, I analyze the ownership dynamics of N strategic risk-averse corporate insiders facing a moral hazard problem. A solution for the equilibrium share price and the dynamics of the aggregate insider stake is obtained in two cases: when agents can credibly commit to an optimal ownership policy and when they cannot commit (time-consistent case). In the latter case, the aggregate stake gradually adjusts towards the competitive allocation. The speed of adjustment increases with N when outside investors are risk-averse, and does not depend on it when investors are risk-neutral. Predictions of the model are consistent with recent empirical findings.

Keywords: Corporate insiders; moral hazard; ownership dynamics (search for similar items in EconPapers)
JEL-codes: D43 G14 G32 (search for similar items in EconPapers)
Date: 2001-02, Revised 2004-10
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econ-papers.upf.edu/papers/787.pdf Whole Paper (application/pdf)

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: https://EconPapers.repec.org/RePEc:upf:upfgen:787

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).