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Empirical work testing for a negative tradeoff between risk and incentives, a cornerstone of agency theory, has not had …
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This paper presents a market equilibrium model of CEO assignment, pay and incentives under risk aversion and heterogeneous moral hazard. Each of the three outcomes can be summarized by a single closed-form equation. In assignment models without moral hazard, allocation depends only on firm size...
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The principal-agent model of executive compensation is of central importance to the modern theory of the firm and …
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