Optimal Managerial Authority (Job Market Paper)

Authority is a central and integral part of the production process and profits allocation in firms. This paper investigates the optimal dynamic delegation of authority in a firm with managerial turnover. The paper finds that the initial delegated authority is robust and tied to the managerial position, although the compensation packages vary with labor market conditions. Dynamically, a fully competent manager should be granted more authority after good realizations, because the turnover probability decreases and the misalignment is alleviated. When the manager's authority can only be adjusted infrequently, inefficient self-dealing behaviors may be acquiesced to. In this case, the manager's authority and lifetime utility depend disproportionately on luck in the early career.

Presentations: TSE Finance Workshop (Scheduled), EFA Doctoral Tutorial 2021 (Virtual), WFC 2021 (Virtual), LSE

Platform Enterprises: Financing, Investment, and Network Growth

This paper develops a tractable micro-founded dynamic platform model featuring cross-group network effects. Networks are analogous to capital-assets, and the platform enterprise invests in the networks by making subsidies to users. The paper solves for the entrepreneur's optimal financing and investment strategies, with limited enforcement as the major financial friction. The main results are: 1) making highly aggressive subsidies by using up available funds is constrained-optimal; 2) per-transaction subsidies decrease over time and are followed by increasing fees; 3) the platform with stronger network effects has a propensity to make more subsidies at initial stages and enjoys a higher valuation; 4) staged financing mitigates the limited enforcement problem, and ceteris paribus, the number of funding rounds decreases with profitability of the platform and increases with required profits by financiers; 5) the value of funds raised each round increases and the financing frequency decreases over time.

Presentations: FMA 2020 (Virtual), AFA Poster 2020 (San Diego), KWC Conference in Entrepreneurial Finance 2019 (Sweden), LSE

Work in Progress

Procrastination in Corporate Governance, with Martin Oehmke (Draft available upon request)

Luck and the Gender Gap among Technological Entrepreneurs, with Yifei Zhang (early stage)

Conference Discussions

• Raising Capital under Demand Uncertainty

By Spyros Terovitis, KWC Conference in Entrepreneurial Finance 2019

• Effectiveness of monitoring, managerial entrenchment, and corporate cash holdings

By Panagiotis Couzo, Shantanu Banerjee, and Grzegorz Pawlina, FMA 2020

• Foundation-controlled Firms and CEO Compensation

By Van Diem Nguyen and Reda M Moursli, WFC 2021