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The Market for Managerial Labor Services and Capital Market Equilibrium

Author

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  • Campbell, Tim S.
  • Kracaw, William A.

Abstract

This paper presents a model of equilibrium in a capital market for linear shares of risky firms andin a market for managerial labor in which market participants function as both investors and managers. The model yields interesting and relevant equilibrium conditions that integrate earlier separate treatments of the capital market with human capital and the incentive contracting problem regarding shirking.The theory developed here provides a microeconomic explanation of how the price of risk established in the capital market is relevant to the labor contracting problem. The analysis also provides a logical rationale for the division of responsibilities between a board of directors and the management of the firm.

Suggested Citation

  • Campbell, Tim S. & Kracaw, William A., 1985. "The Market for Managerial Labor Services and Capital Market Equilibrium," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(3), pages 277-297, September.
    • Handle: RePEc:cup:jfinqa:v:20:y:1985:i:03:p:277-297_01
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    Cited by:

    1. William R. Scott, 1988. "Economic effects of a mandated audit in a contingent†claims production economy," Contemporary Accounting Research, John Wiley & Sons, vol. 4(2), pages 354-388, March.

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