Essays in financial economics
Abstract/Contents
- Abstract
- This dissertation consists of three essays in which I study dynamic incentive problems in corporate finance. In particular, I use methods from dynamic contracts, dynamic games, and stochastic control to study agency and asymmetric information problems in finance and economics. In Chapter 1, ``Contracting Timely Delivery with Hard to Verify Quality, '' I analyze the optimal long-term contract in a setting with an extreme problem of multi-tasking in which one task is value destroying. I study this problem in a stylized continuous-time optimal contract model with hidden effort and imperfect monitoring about project quality. I consider a situation with imperfect performance measures in which the agent can manipulate output as to improve observed performance at the expense of project quality. The optimal contract balances the provision of incentives to exert effort and the cost of monitoring quality. The optimal contract has the following features: 1) termination is unpredictable as otherwise the agent would manipulate performance when he is close to being fired; 2) monitoring is contingent on the agent's past performance -- agents with a weak performance are monitored more thoroughly; 3) cash compensation is deferred longer and the optimal contract has longer duration and lower turnover than in a setup without manipulation. In Chapter 2, ``Trading Dynamics in the Market for Lemons, '' I analyze dynamic trading in a market with a divisible asset and asymmetric information, as in the market for lemons. I characterize an equilibrium in which the seller signals high value by both delay of trade and by retaining a larger fraction of the asset. Due to the lack of commitment not to trade again in the future, separation is only partial and improves over time. In equilibrium, these two signaling mechanisms are related, and delay is an increasing function of cumulative sales. The equilibrium expected surplus is the same as in a static market for lemons in which only low-quality assets are traded. In the dynamic setting, even though there is an efficiency gain because high-quality assets are eventually traded; this gain is offset by the delay in trade of low-quality assets. Finally, Chapter 3, ``Optimal Capital Structure with Contingent Capital Requirements'' study the impact of contingent capital requirements on the optimal capital structure and dividend decisions of a regulated bank.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2013 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Varas Greene, Luis Felipe, Mr |
|---|---|
| Associated with | Stanford University, Graduate School of Business. |
| Primary advisor | DeMarzo, Peter M |
| Primary advisor | Skrzypacz, Andrzej, 1973- |
| Thesis advisor | DeMarzo, Peter M |
| Thesis advisor | Skrzypacz, Andrzej, 1973- |
| Thesis advisor | Duffie, Darrell |
| Advisor | Duffie, Darrell |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Luis Felipe Varas Greene. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2013. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2013 by Luis Felipe Varas Greene
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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