Shareholder heterogeneity, asymmetric information, and the equilibrium manager

Milo Bianchi, Rose-Anne Dana () and Elyes Jouini ()
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Rose-Anne Dana: Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Elyes Jouini: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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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 shareholdersí characteristics.

Keywords: Heterogeneous shareholders; Asymmetric information; Manager-shareholders equilibrium (search for similar items in EconPapers)
Date: 2021-01
Note: View the original document on HAL open archive server: https://hal.science/hal-03693971v1
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Related works:
Journal Article: 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 (2022)
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