Models of banks operating under limited liability with deposit insurance and employee incentive problems are used to analyze how banker compensation contracts can contribute to bank risk shifting. The first model is a multi-agent, moral-hazard model, where each agent (e.g. a loan officer)...

We present a sequence of two-period models of incentive-based compensation in order to understand how the properties of optimal compensation structures vary with changes in the model environment. Each model corresponds to a different occupation within a bank, such as credit line managers, loan...

Models of banks operating under limited liability with deposit insurance and employee incentive problems are used to analyze how banker compensation contracts can contribute to bank risk shifting. The first model is a multi-agent, moral-hazard model, where each agent (e.g. a loan officer)...

A multi-agent, moral-hazard model of a bank operating under deposit insurance and limited liability is used to analyze the connection between compensation of bank employees (below CEO) and bank risk. Limited liability with deposit insurance is a force that distorts effort down. However, the need...

I study firm characteristics that justify the use of options or refresher grants in the optimal compensation packages for CEOs in the presence of moral hazard. I model explicitly the determination of stock prices as a function of the output realizations of the firm: Symmetric learning by all...

I study a problem of repeated moral hazard in which the effect of effort is persistent over time: each period's outcome distribution is a function of a geometrically distributed lag of past efforts. I show that when the utility of the agent is linear in effort, a simple rearrangement of terms in...