Biased principals as a discipline device

Mathias Dewatripont*, Jean Tirole

*Corresponding author for this work

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

This paper rationalizes the existence of multiple, biased principals as a discipline device that induces agents to expend effort. Specifically, principals are given incentives that induce them to take actions that reward (punish) agents after good (bad) performance. This framework is illustrated in the case of corporations, which rely on equity-holders and debtholders to keep management in check, and in the case of multiministry oversight of state-owned firms.

Original languageEnglish (US)
Pages (from-to)195-206
Number of pages12
JournalJapan and the World Economy
Volume8
Issue number2
DOIs
StatePublished - Jan 1 1996

Keywords

  • Budget constraints
  • Debt
  • Equity
  • Multiple principals

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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