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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/38883
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| Title: | | Optimal delegation when the large shareholder has multiple tasks  |
| Authors: | | Graziano, Clara Luporini, Annalisa |
| Issue Date: | | 2010 |
| Series/Report no.: | | CESifo working paper Industrial Organisation 3028 |
| Abstract: | | We analyze the optimal ownership, delegation and compensation structures when a manager is hired to run a firm and to gather information on investment projects. The initial owner has two tasks: monitoring the manager and supervising project choice. Optimality would require a large ownership stake for monitoring but a small stake for not interfering with managerial incentives. Delegating project choice to the manager can alleviate this conflict if managerial private benefits are not too small. The large shareholder retains full ownership of the firm but monitoring, and the resulting firing policy, are distorted. Severance pay plays a key role in the optimal compensation scheme. Delegation is interpreted as a dual-board structure. |
| Subjects: | | large shareholder delegation monitoring board of directors corporate governance |
| JEL: | | G34 L22 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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