Shareholder heterogeneity, asymmetric information, and the equilibrium manager

Milo Bianchi, Rose-Anne Dana () and Elyès Jouini ()
Additional contact information
Rose-Anne Dana: Université Paris-Dauphine, Université PSL
Elyès Jouini: Université Paris-Dauphine, Université PSL

Economic Theory, 2022, vol. 73, issue 4, No 10, 1134 pages

Abstract: Abstract Consider a firm 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) profit 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 shareholders’ characteristics.

Keywords: Heterogeneous shareholders; Asymmetric information; Manager-shareholders equilibrium (search for similar items in EconPapers)
JEL-codes: D24 D51 D53 D70 G32 G34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s00199-021-01349-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Shareholder heterogeneity, asymmetric information, and the equilibrium manager (2022)
Working Paper: Shareholder heterogeneity, asymmetric information, and the equilibrium manager (2022)
Working Paper: Shareholder heterogeneity, asymmetric information, and the equilibrium manager (2021)
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:spr:joecth:v:73:y:2022:i:4:d:10.1007_s00199-021-01349-6

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-021-01349-6

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().