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This paper proposes a simple analysis for examining an agent's optimal decisions in a principal-agency problem. Unlike the standard approach, the target firm's expected return and risk are modeled as a parametric curve in terms of a critical business decision. A general condition is derived for...
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Risk classification refers to the use of observable characteristics by insurers to group individuals with similar expected claims, compute the corresponding premiums, and thereby reduce asymmetric information. Risk classification can be used to mitigate adverse selection and improve insurance...
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needs of clients. Consequently, the agency theory (principal-agent dependency) commonly used in modern times is being …
Persistent link: https://www.econbiz.de/10013489498
Prior research considers the IT governance decision to be a trade-off between the cost-efficiency of centralized information processing, and the responsiveness provided by local information processing. Environmental uncertainty plays a major role in this trade-off. In uncertain environments, the...
Persistent link: https://www.econbiz.de/10014219115
The extant literature has used measurements of CEO risk-taking incentives which do not include the effects of termination provisions such as severance agreements. This paper provides a general form model that allows for the valuation and computation of CEO compensation structures including...
Persistent link: https://www.econbiz.de/10012965715
and physicians, we examine the effect of task characteristics and the legal liability environment on the extent of risk … that physicians bear. We derive the optimal weighting of multiple performance measures in a model of a physician's choice … of revenue-generating and cost control efforts. The model predicts that physicians who face less task uncertainty bear …
Persistent link: https://www.econbiz.de/10014027111
workers' environments and incentive pay. The authors employ Prendergast's (2002) theory that incorporates the delegation of …
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