Are Tournaments Optimal over Piece Rates under Limited Liability for the Principal?
A highly acclaimed result in contract theory is that tournaments are superior to piece rate contracts when the agents are risk averse and their production activities are subject to a relatively large common shock. The reason is that tournaments allow the principal to trade insurance for lower income to the agents. Our analysis shows that this celebrated result does not carry over to the case when a limited liability constraint limits the payments the principal can make, provided that the liquidation value of the firm is sufficiently small. This finding has important implications for the vast number of limited liability firms. Tournaments are still optimal when the liquidation value of the firm is intermediate or large, even though the limited liability constraint is still binding for intermediate values. Surprisingly, uncertainty in the price of output strengthens the need for tournaments by expanding the range of liquidation values over which tournaments are optimal, because price uncertainty introduces additional bankruptcy risk.
The author analyses artickes 195, 196 and 197 of the Russian Federation Criminal Code, devoted to illegal actions that accompany a debtor's bankruptcy, and cocludes that these articles are not sufficient to combat all fraudulent actions in this sphere. The application of articles 159, 160 and 303 of the Criminal Code also doesn't solve the existing problems. That is why the author proposes to penalize actions on the application of knowingly non-existing claims in bankruptcy.
Problems: 1) complexities of an estimation of legitimacy of actions of heads of the credit organization («Risk business»); 2) high degree blanket norms of criminal law; 3) absence of an accurate regulation of the civil-law mechanisms directed on protection of interests of creditors of the credit organizations, and, as consequence, 4) impossibility of an establishment of special norms it is criminally-legal protection right creditors of the credit organizations, in view of accecorn the nature criminally-rules of law.
The present paper is aimed at identifying legal barriers to effective organization of a corporation’s management within pre-bankruptcy period. At the moment, there is a lack of legal regulation of interaction between corporate management bodies in case when temporary financial difficulties can be overcome due to efficient management policy. Reformation of bankruptcy legislation reflects search for the best model of distribution of rights and obligations within a corporation at the stage of bankruptcy predication. However, the conducted study shows that the proposed model is not logical enough. The analysis of the recently introduced innovations reveals that bankruptcy legislation still does not take into account the subtleties of corporate legislation and the specifics of the position of sole executive body (or the "head of the debtor" in the terminology of the Bankruptcy Act) in the corporate management system. The authors discover insufficiently clear definition of the subjects of responsibility for late submission of bankruptcy petitions. Besides the reforms leave out of account the difference in the issues of convening an extraordinary general meeting in different types of corporations. The research covers the issues of protective mechanisms encouraging a corporation’s managers to adopt proactive bailout measures.
The article considers features of carrying out a procedure of restructuring a debt of a citizen who is not an individual entrepreneur in bankruptcy case. Purpose: to study the rehabilitation nature of the structuring procedure based on distinguishing its stages. Methods: analytical and system methods, comparative and legal, technical and legal methods are used. Results: legal consequences of introducing the procedure of restructuring a debtor’s debt allow him to stabilize his financial position and to save his property to meet creditors’ requirements. Actions of a financial manager, first of all, are aimed at providing creditors with a right to take part in the case of the debtor’s bankruptcy. In their turn, creditors are recommended to act with due care and discretion to keep an opportunity to participate in settling the debtor’s legal destiny. The law has additional provisions protecting rights of creditors of the first and second order, and also creditors’ rights referring to the current liabilities, the debt to which shall be repaid before the approval of the debt restructuring plan. Conclusions: having introduced the institute of citizens’ debts restructuring, the Russian legislation legally enables debtors to pay debts during a long term and to keep their property at the same time. Giving an opportunity to choose a bankruptcy procedure applied to debtorsconsumers depending on their liabilities, income and size of debts, the legislator purposes to protect the debtor from loss of property and from psychological stress, thereby strengthening social and economic infrastructure.
A celebrated result in the theory of tournaments is that relative performance evaluation (tournaments) is a superior compensation method to absolute performance evaluation (piece rate contracts) when the agents are risk-averse, the principal is risk- neutral or less risk-averse than the agents and production is subject to common shocks that are large relative to the idiosyncratic shocks. This is because tournaments get closer to the first best by filtering common uncertainty. This paper shows that, sur- prisingly, tournaments are superior even when agents are liquidity constrained so that transfers to them cannot fall short of a predetermined level. The rationale is that, by providing insurance against common shocks through a tournament, payments to the agents in unfavorable states increase and payments in favorable states decrease which enables the principal to satisfy tight liquidity constraints for the agents without pay- ing any ex ante rents to them, while simultaneously providing higher-power incentives than under piece rates. The policy implication of our analysis is that firms should adopt relative performance evaluation over absolute performance evaluation regardless of whether the agents are liquidity (wealth) constrained or not
Proceedings of the 30th International Business Information Management Association Conference
Vision 2020: Sustainable Economic development, Innovation Management, and Global Growth
One of the most important indicators of company's success is the increase of its value. The article investigates traditional methods of company's value assessment and the evidence that the application of these methods is incorrect in the new stage of economy. So it is necessary to create a new method of valuation based on the new main sources of company's success that is its intellectual capital.
This book is devoted to the international dispute resolution in various contexts.
Smoking is a problem, bringing signifi cant social and economic costs to Russiansociety. However, ratifi cation of the World health organization Framework conventionon tobacco control makes it possible to improve Russian legislation accordingto the international standards. So, I describe some measures that should be taken bythe Russian authorities in the nearest future, and I examine their effi ciency. By studyingthe international evidence I analyze the impact of the smoke-free areas, advertisementand sponsorship bans, tax increases, etc. on the prevalence of smoking, cigaretteconsumption and some other indicators. I also investigate the obstacles confrontingthe Russian authorities when they introduce new policy measures and the public attitudetowards these measures. I conclude that there is a number of easy-to-implementanti-smoking activities that need no fi nancial resources but only a political will.