Allocation of Managerial Efforts between the Productive and Investment Purposes in Agency Settings

다국어 초록 (Multilingual Abstract)

This paper examines the agency problem in the two period context, when the agent allocates his effort into productive and investment activities. This study shows that the agent puts forth part of his effort in the "productive" activity to increase the current period production, while spending some effort for the future purposes, which may not contribute to the current payoff.
Lambert [1984] identifies the conditions under which the agent's effort in the second period is a decreasing function of his production in the first period. Also, he states that if the first outcome turns out to be favorable, the agent tries to reduce his effort level, which means shirking behavior. However, the result of this study indicates that as long as the future benefits from the inestment effort is greater than the disutility of the effort expended, the manager commits some effort to the investment effort, instead of shirking. Thus, by setting up a two period and two dimensional effort model, this study shows the social welfare increase in the future period from the investment effort in contrast to shirking, which means the social welfare loss. Also, the investment effort adjusting behavior can be interpreted as the way to provide the saving or borrowing opportunities without access to a capital market.

목차 (Table of Contents)

• 1. Introduction
• 2. Allocation of Effort between Two Purposes
• 3. The Model
• 4. Summary