Raviv, Alon; Sisli-Ciamarra, Elif - In: Journal of Financial Stability 9 (2013) 1, pp. 55-68
In this paper we present a model of executive compensation to analyze the link between incentive compensation and risk taking. Our model takes into account the loss in the value of an executive's expected wealth from employment if the firm becomes insolvent during a bad state of the economy. We...