The agency problem between the owner and the manager in real investment: The bonus-audit relationship |
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Authors: | Michi Nishihara Takashi Shibata |
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Affiliation: | a Center for the Study of Finance and Insurance, Osaka University, Osaka 560-8531, Japan b Graduate School of Social Sciences, Tokyo Metropolitan University, Tokyo 192-0397, Japan |
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Abstract: | This paper derives the owner’s optimal contract with a bonus-incentive and audit when the owner delegates the investment timing decision to a manager with private information on an investment project. The optimal solution not only unifies the previous studies, but also accounts for actual auditing systems in firms. |
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Keywords: | Real options Asymmetric information Agency conflicts Audit |
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