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Incentives for research agents and performance-vested equity-based compensation

Yaping Shan

Journal of Economic Dynamics and Control, 2019, vol. 102, issue C, 44-69

Abstract: This paper studies the agency problem between a firm and its research employees in a dynamic optimal contracting setting. We implement the optimal contract by a risky security, which can be created using the equity of the firm, and a sequence of performance-based holding requirements. This result provides a rationale for using performance-vested equity-based compensation in R&D-intensive start-up firms.

Keywords: Performance-vesting provisions; Dynamic contract; R&D (search for similar items in EconPapers)
JEL-codes: D23 D82 D86 J33 L22 O32 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:dyncon:v:102:y:2019:i:c:p:44-69