| 来源类型 | Discussion paper
|
| 规范类型 | 论文
|
| 来源ID | DP3461
|
| DP3461 Optimal Diversification |
| Joao Gomes; Dmitry Livdan
|
| 发表日期 | 2002-07-20
|
| 出版年 | 2002
|
| 语种 | 英语
|
| 摘要 | A Capital Asset Pricing Model of a stock market economy is examined under different corporate governance structures in which the objectives of managers and entrepreneurs in choosing the risk composition of their firms' returns are not aligned with those of shareholders and investors because of moral hazard. It is shown that incentive compensation, by exposing managers and entrepreneurs to unhedgeable firm-specific risk, induces them to change the stochastic properties of firm cash flows. Since they can trade in markets for aggregate risk but not for firm-specific risk, managers and entrepreneurs produce excessive aggregate risk compared to the first-best allocation. This results in a diversification externality for the stock market investors who cannot share the aggregate risks amongst each other as well as they can the firm-specific risks. The optimal incentive compensation designed to address such diversification externality is fully characterized and it is demonstrated that financial markets interact with the stock market in important ways in determining the effectiveness of incentive contracts in controlling the negative welfare effects of diversification externality. |
| 主题 | Financial Economics
|
| 关键词 | entrepreneurship
Managerial incentives
Hedging
Aggregate risk
Idiosyncratic risk
Stock market efficiency
Capm
Financial innovation
|
| URL | https://cepr.org/publications/dp3461
|
| 来源智库 | Centre for Economic Policy Research (United Kingdom)
|
| 资源类型 | 智库出版物
|
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/532479
|
推荐引用方式
GB/T 7714 |
Joao Gomes,Dmitry Livdan. DP3461 Optimal Diversification. 2002.
|
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