Question: 2. In analyzing the relationship between capital structure and managerial incentives, studies employ substantially different settings. For example, Jensen and Meckling (1976) focus on the

2. In analyzing the relationship between capital structure and managerial incentives, studies employ substantially different settings. For example, Jensen and Meckling (1976) focus on the incentives associated with a combined managerowner; John and John (1993) focus on a principal-agent setting, where the manager is an employee facing a compensation contract designed by a wellfunctioning board of directors; and Zwiebel (1996) focuses on entrenched managers in firms with poorly functioning boards. What are the implications of these different settings for the conclusions of their analyses?

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