Explaining the Structure of CEO Incentive Pay with Decreasing Relative Risk Aversion
Pierre Chaigneau ()
FMG Discussion Papers from Financial Markets Group
It is established that the standard principal-agent model cannot explain the structure of commonly used CEO compensation contracts if CRRA preferences 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.
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Journal Article: Explaining the structure of CEO incentive pay with decreasing relative risk aversion (2013)
Working Paper: Explaining the Structure of CEO Incentive Pay with Decreasing Relative Risk Aversion (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:fmg:fmgdps:dp693
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