Abstract
The corporate finance literature documents that managers tend to over-invest in their companies. A number of theoretical contributions have aimed at explaining this stylized fact, most of them focusing on a fundamental agency problem between shareholders and managers. The present paper shows that over-investments are not necessarily the (negative) consequence of agency problems between shareholders and managers, but instead might be a second-best optimal response to address problems of limited commitment and limited liquidity. If a firm has to rely on relational contracts to motivate its workforce, and if it faces a volatile environment, investments into general, non-relationship-specific, capital can increase the efficiency of a firm's labor relations.
Dokumententyp: | Paper |
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Keywords: | relational contracts; corporate finance; capital investments |
Fakultät: | Volkswirtschaft > Collaborative Research Center Transregio "Rationality and Competition" |
Themengebiete: | 300 Sozialwissenschaften > 330 Wirtschaft |
JEL Classification: | C73, D21, D86, G32 |
URN: | urn:nbn:de:bvb:19-epub-58074-7 |
Sprache: | Englisch |
Dokumenten ID: | 58074 |
Datum der Veröffentlichung auf Open Access LMU: | 27. Sep. 2018, 13:57 |
Letzte Änderungen: | 04. Nov. 2020, 13:37 |