Corporate Financial Structure, Incentives and Optimal Contracting

Rodney L White Center for Financial Research 15-94

Posted: 6 Aug 1999

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Andrew Winton

University of Minnesota - Twin Cities - Carlson School of Management; Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Date Written: June 7, 1994

Abstract

The firm can be regarded as consisting of several groups of investors and managers whose interests are regulated by the contracts between them. This survey covers the literature that looks at the nature of optimal financial contracts in the face of various asymmetries of information, control and type. Five areas are considered: (i) costly state verification and agency; (ii) adverse selection; (iii) the allocation of control rights among investors and the design of ownership structure; (iv) the allocation of risk and (v) acquisition of information.

JEL Classification: G3, G32

Suggested Citation

Allen, Franklin and Winton, Andrew, Corporate Financial Structure, Incentives and Optimal Contracting (June 7, 1994). Rodney L White Center for Financial Research 15-94. Available at SSRN: https://ssrn.com/abstract=5465

Franklin Allen (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Andrew Winton

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 19th Avenue South
Department of Finance
Minneapolis, MN 55455
United States
612-624-0589 (Phone)
612-626-1335 (Fax)

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

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