The Valuation of Assets Under Moral Hazard
The Valuation of Assets Under Moral Hazard
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In our eReader you can find the full English version of the book. Read The Valuation of Assets Under Moral Hazard Online - link to read the book on full screen. Our eReader also allows you to upload and read Pdf, Txt, ePub and fb2 books. In the Mini eReder on the page below you can quickly view all pages of the book - Read Book The Valuation of Assets Under Moral Hazard
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Every manager is assumed to be an expected utility maximizer who possesses a von-Neumann-Morgenstern utility 2 2 function U(a, (J)). It is assumed that 3U/3a U/9({) >0 and 9 U/34) < 0-- every manager is risk averse and has a positive marginal utility for his share of the payoff. In addition, the manager has an aversion toward higher effort. This introduces moral hazard in the model because the principal is interested in maximizing the expected returns accruing to him from the asset, v^7hile the manager simply maximizes his personal expected utility . This kind of moral hazard is similar, but not identical, to that discussed by Jensen and Heckling (1976). In their model the problem is created due to the manager's propensity to consume prerequisites from firm resources. In either case, unless certain special conditions are satisfied, separation of ownership and control wilj. inevitably engender moral hazard. Actions taken by managers, and consequently the efficiency with which assets are managed, may not be observable or verifiable by principals ex-post.
What to read after The Valuation of Assets Under Moral Hazard?
You can find similar books in the "Read Also" column, or choose other free books by Ram T S Ramakrishnan to read online
To quickly assess the difficulty of the text, read a short excerpt:
Every manager is assumed to be an expected utility maximizer who possesses a von-Neumann-Morgenstern utility 2 2 function U(a, (J)). It is assumed that 3U/3a U/9({) >0 and 9 U/34) < 0-- every manager is risk averse and has a positive marginal utility for his share of the payoff. In addition, the manager has an aversion toward higher effort. This introduces moral hazard in the model because the principal is interested in maximizing the expected returns accruing to him from the asset, v^7hile the manager simply maximizes his personal expected utility . This kind of moral hazard is similar, but not identical, to that discussed by Jensen and Heckling (1976). In their model the problem is created due to the manager's propensity to consume prerequisites from firm resources. In either case, unless certain special conditions are satisfied, separation of ownership and control wilj. inevitably engender moral hazard. Actions taken by managers, and consequently the efficiency with which assets are managed, may not be observable or verifiable by principals ex-post.
What to read after The Valuation of Assets Under Moral Hazard?
You can find similar books in the "Read Also" column, or choose other free books by Ram T S Ramakrishnan to read online
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