The DOI matches its Crossref record; 11 of the 11 references it cites were found in a registry or an index.
Resolving the Agency Problems of External Capital through Options
Abstract
This paper investigates the role of stock options in resolving the agency problems of external capital as originally identified by Jensen and Meckling (1976). These problems are precipitated by managerial incentives a) to consume excessive non‐pecuniary benefits or perquisites beyond the optimal level for sole ownership and b) to engage in risk shifting in productive decisions so as to transfer wealth from external capital contributors. These incentive problems can be resolved through a strategy that judiciously combines call and put options retained by the owner‐manager and external financiers, respectively. The resolution of the agency problems through this mechanism provides an economic rationale for the existence of managerial stock options and convertible debt.
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Citations
Cites
Theory of the firm: Managerial behavior, agency costs and ownership structure
Jensen, M. C., & Meckling, W. H. (1976) · Journal of Financial Economics · doi:10.1016/0304-405x(76)90026-x · Cited by 71,491
The pricing of options and corporate liabilities
Black, F., & Scholes, M. (1973) · Journal of Political Economy · doi:10.1086/260062 · Cited by 29,074
Agency Problems and the Theory of the Firm
Fama, E. F. (1980) · Journal of Political Economy · doi:10.1086/260866 · Cited by 10,466
Moral Hazard and Observability
Holmstrom, B. (1979) · The Bell Journal of Economics · doi:10.2307/3003320 · Cited by 8,311
Theory of Rational Option Pricing
Merton, R. C. (2019) · World Scientific Reference on Contingent Claims Analysis in Corporate Finance · doi:10.1142/9789814759588_0002 · Cited by 7,948
Theory of rational option pricing
Merton, R. C. (2005) · Theory of Valuation · doi:10.1142/9789812701022_0008 · Cited by 7,161
Risk Sharing and Incentives in the Principal and Agent Relationship
Shavell, S. (1979) · The Bell Journal of Economics · doi:10.2307/3003319 · Cited by 1,285
Property Rights and Economic Theory: A Survey of Recent Literature
Furubotn, E. G., & Pejovich, S. (1972) · Journal of Economic Literature · Cited by 1,122
The Pricing of Contingent Claims in Discrete Time Models
BRENNAN, M. J. (1979) · The Journal of Finance · doi:10.1111/j.1540-6261.1979.tb02070.x · Cited by 546
THE RELATIONSHIP BETWEEN PUT AND CALL OPTION PRICES
Stoll, H. R. (1969) · The Journal of Finance · doi:10.1111/j.1540-6261.1969.tb01694.x · Cited by 375
Cited by
Managerial Entrenchment and Capital Structure Decisions
BERGER, P. G., OFEK, E., & YERMACK, D. L. (1997) · The Journal of Finance · doi:10.1111/j.1540-6261.1997.tb01115.x · Cited by 1,534
Swinging for the Fences: The Effects of Ceo Stock Options on Company Risk Taking and Performance
Sanders, W. G., & Hambrick, D. C. (2007) · Academy of Management Journal · doi:10.5465/amj.2007.27156438 · Cited by 757
Evidence on the Impact of the Agency Costs of Debt on Corporate Debt Policy
Kim, W. S., & Sorensen, E. H. (1986) · The Journal of Financial and Quantitative Analysis · doi:10.2307/2330733 · Cited by 632
The Effect of Executive Stock Option Plans on Stockholders and Bondholders
DeFUSCO, R. A., JOHNSON, R. R., & ZORN, T. S. (1990) · The Journal of Finance · doi:10.1111/j.1540-6261.1990.tb03707.x · Cited by 489
Are executive stock options associated with future earnings?
Hanlon, M., Rajgopal, S., & Shevlin, T. (2003) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2003.10.008 · Cited by 474
Metadata
- Authors
- HAUGEN, R. A., & SENBET, L. W.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1981-06
- Volume
- 36
- Issue
- 3
- Pages
- 629-647
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2130209614
- Cited by
- 419
- References
- 11
- FWCI
- 14.56
- Type
- journal article
- Language
- en
- Open access
- closed
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- HAUGEN, R. A., & SENBET, L. W. (1981). Resolving the Agency Problems of External Capital through Options. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.1981.tb00649.x
Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
