The business cycle has a significant impact on the performance of the organizations. It influences overall compensation costs. The business cycle involves understanding different phases of the economic activity such as periods of expansion, in which there is broad economic growth, and periods of...

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...