Compensation schemes have been blamed for encouraging excess risk-taking on the part of managers within the financial … system and real economy. In general, compensation cannot decrease below the base salary, while gains from bonuses can be … limitless. The potential link between compensation and risk behavior is analyzed in this paper. A behavioral experiment with …

This paper demonstrates that executive compensation convexity, measured as the sensitivity of managerial equity … compensation portfolios to stock volatility, predicts firm-specific crashes. A bottom-to-top decile change in compensation … contrast, there is no robust evidence of a symmetric relation between compensation convexity and a firm's idiosyncratic …

We present a general-equilibrium theory of contracting in which managers are concerned about their social standing in a … compensation arrangements and risk taking in the cross section …

both firm-level profits and managers' compensation. Consequently, managers' incentives are positively correlated with firm … provide to their managers. A central assumption is that there is free entry and exit in the industry, which implies that …

Integrated ownership is often seen as a way to foster specific investments. However, even in integrated firms, managers … invest to maximize their compensation, which is chiefly driven by divisional income. Thus it is not clear that integration …, integration calls for low-powered incentive contracts: the managers invest more as they are less exposed to the investment …

2008 financial crisis. Strong and weak banks also stand apart: managers from weak banks took more risk than their peers in …