ISB

Rigged Economies
By Franklin Allen, Archishman Chakraborty, Bhagwan Chowdhry, Nishant Ravi
Citation
Allen, Franklin., Chakraborty, Archishman., Chowdhry, Bhagwan., Ravi, Nishant. (2019). Rigged Economies .
Copyright
2019
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Abstract
We model settings where shareholders cannot fully appreciate the opportunities available tothe firm (hidden information) or fully monitor the decisions of CEOs (hidden action). We showthat even when CEOs have no bargaining power, shareholders will set optimal compensationcontracts in which CEOs often earn rents, get rewarded for “luck” and CEO compensation seemshigh even when a firm’s stock price falls. Small changes in outside options or productivity inone sector can lead to large increases in CEO compensation across many sectors, sometimeseven at the expense of shareholder value, even though the market for CEOs is competitive.
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Contributions
Bhagwan Chowdhry

Bhagwan Chowdhry is a Professor of Finance at the Indian School of Business (ISB). He began his teaching career at UCLA Anderson in 1988 where he found an opportunity to work with and learn from outstanding faculty colleagues and an ability to work with students on projects that will make a difference in the world. During his tenure, he has also been a visiting professor and lecturer at a variety of institutions, including the University of Chicago, University of Illinois at Chicago, the Hong Kong University of Science and Technology, and the Indian School of Business. He is a current visiting scholar at the Stellar Development Foundation.

His research interests lie in international finance, corporate finance and strategy. He has served on the editorial boards of a number of leading publications, including the Journal of Finance, Review of Financial Studies, American Economic Review, and Journal of Political Economy. He has also organised and taught executive education programmes on financial derivatives, corporate risk management and valuation in Los Angeles, Singapore, Hong Kong, Mumbai, and Hyderabad.

Microfinance, financial technology, and impact investing are his recent teaching, research, and applied interests. He has supervised several MBA student projects in microfinance and FinTech in recent years and has taught undergraduate seminars and an MBA elective on these subjects. He believes that one of his greatest joys comes from working with smart people who strive to make this world a better place, especially for people with limited resources and opportunities. He is constantly thinking about, doing research on, and getting involved in projects that will make a difference in the world.

That commitment may be best illustrated with his proposed ‘Financial Access at Birth (FAB)’ initiative, in which every child born in the world is given an initial deposit of $100 in an online bank account, ensuring that everyone in the world will have access to financial services within a few decades.

Professor Chowdhry is a frequent contributor to the Huffington Post and is the co-founder (with Professor Ivo Welch) and executive editor of a new publication, Finance & Accounting Memos (FAMe),which makes academic research more accessible for MBA and PhD students, journalists, policy makers, and other academics.

Bhagwan Chowdhry
Nishant Ravi

Nishant Ravi is an Assistant Professor of Economics and Public Policy at the Indian School of Business (ISB). He received his PhD in Economics from the University of Pennsylvania. His research interests include applied microeconomic theory, game theory, organisational economics, information economics.

Nishant Ravi