The Effect of Uncertainty and Information Asymmetry on the Structure of Compensation Contracts: A Test of Competing Models

Narayan S. Umanath, Manash R. Ray and Terry L. Campbell
Additional contact information
Narayan S. Umanath: College of Business Administration, University of Tulsa, Tulsa, Oklahoma 74104
Manash R. Ray: College of Business and Economics, Lehigh University, Bethlehem, Pennsylvania 18015
Terry L. Campbell: Center for International Management & Industrial Development (CIMID), 63 Chemim Charles-Poluzzi, CH-1227 Carouge (GE), Switzerland

Management Science, 1996, vol. 42, issue 6, 868-874

Abstract: This research note reports results of a laboratory experiment conducted as a follow-up investigation of an earlier study by Umanath, Ray and Campbell (Umanath, N. S., M. R. Ray, T. L. Campbell. 1993. The impact of perceived environmental uncertainty and perceived agent effectiveness on the composition of compensation contracts. Management Sci. (January) 32--45.). Here, we focus on a specific unexpected result of Umanath et al. who found evidence contradicting the theoretical prediction with respect to the impact of environmental uncertainty on the composition of compensation contracts. Umanath et al., in retrospect, offered an explanation for their unexpected finding based on an alternative theory under the same agency framework. Our results not only ratify the alternative explanation offered by Umanath et al., but also identify information symmetry/asymmetry as the contingent factor capable of reconciling the apparently contradicting predictions of the two agency-based theories used in this research.

Keywords: compensation plans; agency theory; incentive contracts; salary-incentive mix; information asymmetry (search for similar items in EconPapers)
Date: 1996
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.42.6.868 (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:inm:ormnsc:v:42:y:1996:i:6:p:868-874

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().