Explaining the structure of CEO incentive pay with decreasing relative risk aversion
Pierre Chaigneau ()
Journal of Economics and Business, 2013, vol. 67, issue C, 4-23
It is established that the standard principal-agent model cannot explain the structure of commonly used CEO compensation contracts if preferences with constant relative risk aversion are postulated. However, we demonstrate that this model has potentially a high explanatory power with preferences with decreasing relative risk aversion, in the sense that a typical CEO contract is approximately optimal for plausible preference parameters.
Keywords: CEO pay; Principal-agent model; Corporate governance; Decreasing relative risk aversion; Stock-options (search for similar items in EconPapers)
JEL-codes: G30 M52 (search for similar items in EconPapers)
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Working Paper: Explaining the Structure of CEO Incentive Pay with Decreasing Relative Risk Aversion (2012)
Working Paper: Explaining the Structure of CEO Incentive Pay with Decreasing Relative Risk Aversion (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:67:y:2013:i:c:p:4-23
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