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Explaining the Structure of CEO Incentive Pay with Decreasing Relative Risk Aversion

Pierre Chaigneau

Cahiers de recherche from CIRPEE

Abstract: 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.

Keywords: CEO pay; principal-agent model; corporate governance; stock-options (search for similar items in EconPapers)
JEL-codes: G30 M52 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Explaining the structure of CEO incentive pay with decreasing relative risk aversion (2013) Downloads
Working Paper: Explaining the structure of CEO incentive pay with decreasing relative risk aversion (2011) Downloads
Working Paper: Explaining the Structure of CEO Incentive Pay with Decreasing Relative Risk Aversion (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:1208

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