Explaining the Structure of CEO Incentive Pay with Decreasing Relative Risk Aversion

It is established that the standard principal-agent model cannot explain the structure of commonly used CEO compensation contracts if CRRA preferences are postulated. However, we demonstrate that this model has potentially a high explanatory power with preferences with decreasing relative risk aversion, in the sense that a typical CEO contract is approximately optimal for plausible preference parameters.

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Year of publication:	2012
Authors:	Chaigneau, Pierre
Institutions:	Centre Interuniversitaire sur le Risque, les Politiques Économiques et l'Emploi (CIRPÉE)
Subject:	CEO pay \| principal-agent model \| corporate governance \| stock-options

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Extent:	application/pdf
Series:	Cahiers de recherche.
Type of publication:	Book / Working Paper
Classification:	G30 - Corporate Finance and Governance. General ; M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs)
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010615162