A Model of Myopic Corporate Behaviour with Efficient Stock Markets and Optimal Management Incentive Programs

G.T. Garvey, Simon Grant and Stephen King

Working Papers from Australian National University - Department of Economics

Abstract: Existing models of corporate "short-termism" rely on an exogenously imposed, suboptimal management objective function. This paper endogenizes both managers' concern for short-term stock prices and the resulting distorsions. We consider a standard agency problem between corporate managers and investors in which the short-term share price is determined before the manager has made her effort choice and therefore cannot be informative in the standard principal-agent sense.

Keywords: MODELS; STOCK MARKET; FINANCIAL MARKET (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 G19 (search for similar items in EconPapers)
Pages: 17 pages
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:fth:aunaec:307

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