Managing Employee Compensation Risk

Paul E. Fischer
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Paul E. Fischer: University of Pennsylvania

Review of Accounting Studies, 2000, vol. 4, issue 1, No 3, 45-60

Abstract: Abstract We analyze a principal-agent model in which the principal (e.g., shareholders) and the agent (e.g., an employee) can personally trade securities tied to the outcome of an uncontrollable event affecting output. The model is employed to address two questions. First, under what conditions does compensation risk management at the individual level substitute for compensation risk management at the firm level? Second, if compensation risk management at the firm level is optimal, how should the compensation risk be managed?

Keywords: Controllable Event; Risk Management Strategy; Optimal Contract; Compensation Risk; Uncontrollable Event (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1023/A:1009685921612

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