Incentives, project choice, and dynamic multitasking

Artikel

I study the optimal choice of projects in a continuous-time moral hazard model with multitasking. I characterize the distortions caused by moral hazard and the dynamics of the firm's project choice. Both overinvestment and underinvestment relative to an NPV criterion can occur on the path of the contract. As past performance increases, the firm chooses projects which require higher pay-performance sensitivity. When the continuation value is large, investment projects are chosen more efficiently, and project choice depends more on the NPV and less on the incentive costs. I implement the optimal contract with an equity stake, bonus payments, and a personal account.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 14 ; Year: 2019 ; Issue: 3 ; Pages: 813-847 ; New Haven, CT: The Econometric Society

Classification and Topics

• Classification: Wirtschaft ; Economics of Contract: Theory ; Portfolio Choice; Investment Decisions ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Personnel Management; Executives; Executive Compensation ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Subject: Continuous-time contracting ; project choice ; multitasking ; bonus payments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Szydlowski, Martin
• Event: Veröffentlichung
• (who): The Econometric Society
• (where): New Haven, CT
• (when): 2019

Further information

• DOI: doi:10.3982/TE2858
• Handle: http://hdl.handle.net/10419/217078
• Last update: 10.03.2025, 11:44 AM CET