Insider Trading and the Problem of Corporate Agency |
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absence of insider adverse selection agent chooses allowing insider trading analysis assumption Bank of Atlanta Bertrand competition best response chooses the effort chooses the shirking comparative statics compensation contract condition effect of insider effort decision effort strategy effort with probability effort-assuring compensation effort/trading endogenized equilibrium compensation ex ante utility exert effort feasible Federal Reserve Bank fixed compensation level Georgia State University implies incentive payment insider trading opportunities insider trading policy Lemma A5 manager chooses managerial compensation managerial effort incentives managerial incentives managerial labor market managers to trade marketmaker mixed strategy moral hazard Nash equilibrium noise traders optimal policy payoff permitting insider trading precommit profits from insider prohibiting insider trading prohibition of insider PROOF OF LEMMA PROOF OF PROPOSITION pure strategy equilibrium represent s-claims securities markets shirk with probability shirking strategy So/Pn subgame Thomas H trading is allowed trading profits um(nt um(t v(nt w/pn