Linear contracts are popular in delegated portfolio management. This paper studies the incentive of linear performance-adjusted contracts in delegated portfolio management under a VaR constraint with a principal-agent model and numerical analysis. It is shown that a linear performance-based...

We document the propensity of Standard & Poor's 500 index companies to just meet, rather than overshoot or just miss, performance targets in CEOs' annual incentive plans to boost cash bonuses. The statistical anomaly occurs only in the 4th quarter and is robust to alternative assumptions of...