This paper provides new UK evidence on the relationship between managerialincentives and firm risk using a hand-collected database of 3307 executive yearobservations (698 CEO years and 2609 other executive years). We find that therelation between pay performance sensitivity and firm risk...

This paper examines the effect of using different option valuation models to calculatethe fair market value of Executive Stock Options (ESOs) granted to executivedirectors of UK firms. Our key objective is to demonstrate empirically that somecompanies will have greater incentive and benefit from...

We value UK executive stock options (ESOs) as American options that areawarded conditional on the probability of the holders achieving some performancecriteria. Unlike the standard Black and Scholes (BS) model, which is universally usedboth in the literature and practice, this provides a more...

Market share objectives are prominent in many industries, especially where man-agers pay much attention to league table rankings. This paper explores the strategicrationale for giving managers incentives based on market share in an oligopoly com-peting in strategic substitutes. Moreover, the...

We present evidence on the effect of social connections between workers and managerson productivity in the workplace. To evaluate whether the existence of social connections isbeneficial to the firm’s overall performance, we explore how the effects of social connectionsvary with the strength...

Empirical and experimental papers nd that high-powered incentives may re-duce performance rather than improve it; a phenomenon referred to as "chokingunder pressure". We show that competition for high ability workers neverthelessleads rms to oer high bonus payments, thereby deliberately...

The introduction of the accounting standards SFAS 123R and IFRS 2 forexecutive stock options has led to an important change. As companies arenow forced to value their stock options at grant date for accounting purposes,the robustness of prices against the choice of certain valuation models...

The Peter Principle states that, after a promotion, the observed output of promotedemployees tends to fall. Lazear (2004) models this principle as resulting from a regression tothe mean of the transitory component of ability...

One of the main issues of the reform regarding a professor’s remuneration at German universitiesis the introduction of a performance-dependent salary. This paper applies relative rank ordertournaments to special performance benefits at university level. It turns out that the awardingprocedure...

Incentives often fail in inducing economic agents to engage in a desirableactivity; implementability is restricted. What restricts implementability?When does re-organization help to overcome this restriction?This paper shows that any restriction of implementabilityis caused by an identification...