Risk management and optimal investment with inalienable human capital

Yang，Zeyu; Zhuo，Jiayi; Zhang，Yuqian

2024-03-01

10.1016/j.frl.2023.104970

Finance Research Letters   影响因子和分区

1544-6123

We consider a moral hazard problem in a continuous-time model, where project risk is controllable. The unobservability of agent behavior creates information asymmetry, consequently influencing investor decisions. We utilize martingale methods to determine the optimal policy. The investor's scaled value function is represented using an ordinary differential equation. We find that the manager's search for new investors impacts the boundary conditions due to inalienable human capital. Using comparative static analysis, we find that the endogenous no-saving condition helps eliminate information asymmetry caused by unobserved effort. Moreover, as the agent's continuation value increases, the company's risk management target approaches the optimal risk management target under full information. A higher manager's continuation value leads to inferior investment opportunities.

Human capital Information asymmetry Optimal investment Risk management Security design

SSCI

英语

第一 ; 通讯

2-s2.0-85181844035

Scopus

School of Business,Southern University of Science and Technology,Shenzhen,518055,China

Yang，Zeyu,Zhuo，Jiayi,Zhang，Yuqian. Risk management and optimal investment with inalienable human capital[J]. Finance Research Letters,2024,61.

Yang，Zeyu,Zhuo，Jiayi,&Zhang，Yuqian.(2024).Risk management and optimal investment with inalienable human capital.Finance Research Letters,61.

Yang，Zeyu,et al."Risk management and optimal investment with inalienable human capital".Finance Research Letters 61(2024).