This study explores the relationship between executive compensation and the preference dynamics of managers and shareholders. Our analysis centers on the theoretical prediction that changes in firms' asset value can differentially affect the risk-taking preferences of the two groups, potentially influencing the optimal compensation policy. Utilizing local real estate price changes to identify variations in firms’ asset value, we find that a decrease in asset value leads to more risk-taking incentives in compensation, and this effect is more pronounced in firms that are more likely to be influenced by the hypothesized mechanisms. In the second empirical setting, we provide corroborating evidence using a natural experiment involving disaster-induced negative shocks to the firm fundamentals. Collectively, our findings suggest that the design of compensation contracts facilitates incentive alignment by incorporating the dynamic preferences of the contracting parties.

In this paper, we investigate the real effects of information transparency in crowdfunding markets. Our analysis shows that the crowdfunding market features an under‐implementation inefficiency, driven by two types of uncertainty that consumers face: fundamental uncertainty about the entrepreneur's implementation cost, and strategic uncertainty due to potential coordination failures among consumers. We find that when both fundamental and strategic uncertainties are present, eliminating the fundamental uncertainty alone by revealing the implementation cost does not necessarily improve efficiency. Surprisingly, from an ex ante perspective, greater transparency makes the coordination among crowdfunding consumers less efficient, which makes the under‐implementation problem even worse and thus impairs efficiency. Our findings send a message of caution against promoting greater transparency in the crowdfunding market.