Although the standard principal-agent model predicts a negative relation between incentive strength (i.e., pay-performance-sensitivity or PPS) and firm risk, the empirical evidence is mixed (Prendergast, 2002). This study revisits this prediction. Using carefully selected litigation events to...

Purpose – The purpose of this paper is to better understand the main effects of agent conscientiousness and reciprocity norm and the interaction effect of these two factors on layoff decisions in firm‐employee relationships. Design/methodology/approach – A scenario‐based experiment with...