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 preferences with constant relative risk aversion 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:	2013
Authors:	Chaigneau, Pierre
Published in:	Journal of Economics and Business. - Elsevier, ISSN 0148-6195. - Vol. 67.2013, C, p. 4-23
Publisher:	Elsevier
Subject:	CEO pay \| Principal-agent model \| Corporate governance \| Decreasing relative risk aversion \| Stock-options

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Type of publication:	Article
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/10010666291