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How important are risk-taking incentives in executive compensation?

Dittmann, Ingolf; Yu, Ko-Chia - 2009

-taking incentives in addition to effort incentives. We develop a stylized principal-agent model that captures the interdependence … between firm risk and managerial incentives. We calibrate the model to individual CEO data and show that it can explain … with the almost uniform use of at-the-money stock options. We conclude that the provision of risk-taking incentives is a …

Persistent link: https://www.econbiz.de/10011378949

Acquisitions as a real options bidding game

Smit, Han T. J.; Berg, Ward A. van den; De Maeseneire, … - 2005

This paper uses a unified treatment of real options and game theory to examine value appropriation in takeovers within a competitive environment of imperfect information. The integrated model considers a potential target as a shared real option on a bundle of resources. Competing potential...

Persistent link: https://www.econbiz.de/10011337396

The value relevance of disclosing a single corporate target : an explorative empirical analysis

Cools, Cornelis; Praag, Mirjam van - 2003

This paper explores the relationship between disclosing corporate targets and value creation. Our empirical results show the value relevance of voluntarily disclosing a low number of targets, whereas there is a clear additional positive effect of disclosing exactly one corporate target in the...

Persistent link: https://www.econbiz.de/10011453249

Disciplining and screening top executives

Dominguez-Martinez, Silvia; Swank, Otto H.; Visser, Bauke - 2006

Boards of directors face the twin task of disciplining and screening executives. To perform these tasks directors do not have detailed information about executives' behaviour, and only infrequently have information about the success or failure of initiated strategies, reorganizations, mergers...

Persistent link: https://www.econbiz.de/10011349199

The self-perception theory vs. a dynamic learning model

Swank, Otto H. - 2006

Several economists have directed our attention to a finding in the social psychological literature that extrinsic motivation may undermine intrinsic motivation. The self-perception (SP) theory developed by Bem (1972) explains this finding. The crux of this theory is that people remember their...

Persistent link: https://www.econbiz.de/10011349711

Optimal incentives without expected utility

Gonzalez Jimenez, Victor H. - 2022

This paper investigates the optimal design of incentives when agents distort probabilities. We show that the type of …, the strength of the incentives included in the optimal contract, and the location of incentives on the output space. Our …

Persistent link: https://www.econbiz.de/10013460007

The economic value of flexibility when there is disagreement

Boot, Arnoud W. A.; Thakor, Anjan V. - 2002

We develop an economic theory of “flexibility”, which we interpret as the discretion orability to make a decision that others disagree with. We show that flexibility is essentiallyan option for the decisionmaker, and can be valued as such. The value of the flexibilityoption is decreasing in...

Persistent link: https://www.econbiz.de/10011332819

Disagreement and flexibility : a theory of optimal security issuance and capital structure

Boot, Arnoud W. A.; Thakor, Anjan V. - 2002

In this paper we introduce flexibility as an economic concept and apply it to the firm’ssecurity issuance decision and capital structure choice. Flexibility is the ability to makedecisions that one thinks are best even when others disagree. The firm’s management valuesflexibility because it...

Persistent link: https://www.econbiz.de/10011332820

Go public or stay private : a theory of entrepreneurial choice

Boot, Arnoud W. A.; Gopalan, Radhakrishnan; Thakor, Anjan V. - 2003

In this paper we analyze an entrepreneur /manager's choice between private and public ownership in a setting in which management needs some elbow room or autonomy to optimally manage the firm. In public capital markets, the corporate governance regime in place exposes the firm to exogenous...

Persistent link: https://www.econbiz.de/10011334339

A Monte Carlo comparison between the free cash flow and discounted cash flow approaches

Akalu, Mehari Mekonnen; Turner, J. Rodney - 2002

One of the debates in the capital budgeting model selection is between the free cash flow and DCF methods. In this paper an attempt is made to compare SVA against NPV model based on Monte Carlo simulations. Accordingly, NPV is found less sensitive to value driver variations and has got higher...

Persistent link: https://www.econbiz.de/10011327539

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