Wall Street occupations

Ulf Axelson and Philip Bond

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Many finance jobs entail the risk of large losses, and hard-to-monitor effort. We analyze the equilibrium consequences of these features in a model with optimal dynamic contracting. We show that finance jobs feature high compensation, up-or-out promotion and long work hours, and are more attractive than other jobs. Moral hazard problems are exacerbated in booms, even though pay increases. Employees whose talent would be more valuable elsewhere can be lured into finance jobs, while the most talented employees might be unable to land these jobs because they are “too hard to manage.”

Keywords: investment banking; compensation contracts (search for similar items in EconPapers)
JEL-codes: E24 G24 J31 J33 J41 M51 M52 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2015-10
New Economics Papers: this item is included in nep-hrm, nep-lma, nep-mac and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

Published in Journal of Finance, October, 2015, 70(5), pp. 1949 - 1996. ISSN: 0022-1082

Downloads: (external link)
http://eprints.lse.ac.uk/37448/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:37448

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().