Endogeneity of Ceo Compensation and Corporate Crime

Abstract. We model costly interactions (contracts) between managers and investors. We suggest that globalization of production and favorable technology shock of the 1990s altered economic environment of managerinvestor interactions. These changes exacerbate agency conflict due to the increased managerial gains from ex post reneging, and, simultaneously, decreased costs of managerial reneging. In this case, the managerial share of surplus increases at investor expense.