The effects of a long-term compensation plan on risky choices

Stephen A. Butler

International Journal of Behavioural Accounting and Finance, 2008, vol. 1, issue 1, 51-66

Abstract: Long-term compensation plans have been suggested as means of providing incentives to the managers to maximise stockholders' welfare. There is no direct evidence that the existence of these plans will change the decision-making behaviour of individual managers. The following study examined the effect of a long-term compensation plan on risky choice behaviour. Two experiments indicate that risky choices will vary depending on the coding of the outcomes. Participants were risk seeking when presented with the possibility of losses, but risk averse for gains. It is then shown that the introduction of a long-term compensation plan appears to cause the participants to make less risk averse choices.

Keywords: incentive compensation; laboratory experiment; managerial decision making; risky choice; long-term planning; compensation planning; stockholder welfare; choice behaviour; risk taking; risk averse. (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=21025 (text/html)
Access to full text is restricted to subscribers.

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:ids:ijbeaf:v:1:y:2008:i:1:p:51-66

Access Statistics for this article

More articles in International Journal of Behavioural Accounting and Finance from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().