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Prof. Zeqiong Huang
Associate Professor of Accounting
School of Management
Yale University

This paper examines how shareholders’ investment horizon shapes compensation contracts and managerial actions, and how contract disclosure alters this relation. We develop a model in which shareholders contract with a risk-averse manager who exerts productive effort and may manipulate earnings before shares are sold to outside investors. Higher resale exposure corresponds to a shorter effective shareholder horizon. Under public contracting, outside investors condition scrutiny on disclosed compensation terms, allowing original shareholders to internalize the scrutiny response. Contractual short-termism is therefore hump-shaped in resale exposure. Under private contracting, opacity creates price-inflation and risk-shifting wedges that cause contractual short-termism to rise monotonically with resale exposure. In both regimes, the original shareholders’ payoff is maximized at an intermediate level of resale exposure, but the maximizing level is higher under disclosure. In a multi-firm extension, private contracting can yield higher social welfare than public contracting when cross-firm spillovers are sufficiently strong.