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Incentive provision is a central question in modern economic theory. During the run up to the financial crisis, many … banks attempted to encourage loan underwriting by giving out incentive packages to loan officers. Using a unique data set on … small business loan officer compensation from a major commercial bank, we test the model’s predictions that incentive …
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Our paper evaluates recent regulatory proposals mandating the deferral of bonus payments and claw-back clauses in the financial sector. We study a broadly applicable principal agent setting, in which the agent exerts effort for an immediately observable task (acquisition) and a task for which...
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This paper investigates whether observed executive compensation contracts are designed to provide risk-taking incentives in addition to effort incentives. We develop a stylized principal-agent model that captures the interdependence between firm risk and managerial incentives. We calibrate the...
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