The three essays collected in this PhD dissertation concern agency costs, incentive contracts, mergers and acquisitions, and firm risk. The first essay demonstrates that manager sentiment, a managerial trait proxy for managerial optimism, can incur agency costs. The second and third essays state incentive contracts as an effective way to suppress agency problems and reduce agency costs. Specifically, the second essay demonstrates that firms using relative performance evaluation exhibit lower stock price crash risk and the third essay finds that relative performance evaluation increases long-term acquisition performance.