Agency-based asset pricing

摘要

We study an infinite-horizon Lucas tree model where a manager is hired to tend to the trees and is compensated with a fraction of the trees' output. The manager trades shares with investors and makes an effort that determines the distribution of the output. When the manager is less (more) risk-averse than the investors, managerial trading results in a less (more) volatile stock price and a lower (higher) risk premium. Trading between the manager and investors acts as an indirect renegotiation mechanism that dynamically modulates the manager's incentives and allocates risk and return, but its effectiveness is limited with dispersed small investors.