Abstract
We develop a dynamic multitasking model for a financially constrained firm that manages both current cash reserves through short-term effort incentives and firm growth via long-term effort incentives. We demonstrate that financing constraints lead to an overinvestment in short-term efforts compared to a scenario without such constraints, resulting in short-termism. In addition, we also show that both permanent and transitory shocks exert an ambiguous impact on the payout thresholds under conditions of positive correlation between the transitory and permanent shocks.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
