Kanagaretnam, Kiridaran; Sarkar, Sudipto - In: Economic Modelling 28 (2011) 1, pp. 308-315
This paper studies the effect of managerial compensation terms on the well-known “underinvestment” incentive. We extend the Mauer and Ott (2000) real-option model of corporate expansion, and show that, when the manager maximizes the value of his compensation package (rather than equity...