How executive incentive design affects risk-taking: a literature review

Niklas Kreilkamp, Sascha Matanovic, Maximilian Schmidt and Arnt Wöhrmann ()
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Niklas Kreilkamp: Giessen University
Sascha Matanovic: Giessen University
Maximilian Schmidt: Giessen University
Arnt Wöhrmann: Giessen University

Review of Managerial Science, 2023, vol. 17, issue 7, No 6, 2349-2374

Abstract: Abstract This paper presents a review of research regarding the effects of monetary executive incentives on risk-taking. More precisely, we investigate executives’ risk-taking (i) in response to the curvature (steepness, convexity, concavity) of the compensation function and (ii) with regard to reference points. Thereby, we refine and update common textbook knowledge. In this vein, we identify essential moderators at the personal, firm, or environmental level that can be used to assess the effectiveness of the incentive scheme in a specific context. Implications for incentive system design in practice and paths for future research are discussed.

Keywords: Risk-taking; Risk behavior; Incentives; Management control systems; M12; M41; M52 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11846-022-00582-0

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