Optimal Executive Compensation: Bonus, Golden Parachutes, Stock Ownership and Stock Options

Chongwoo Choe

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: This paper studies optimal managerial contracts applying both complete and incomplete contracting approaches. In a complete contracting environment where contracts can be based on earnings, an optimal contract is interpreted as a combination of base salary, golden parachute and bonus. When earnings are not veri able, two types of optimal contracts are derived: a contract with restricted stock ownership, and a contract with stock options. These three types of optimal contracts are payoff-equivalent in a strong sense: agents' ex ante and ex post payoffs are the same under all three contracts. This suggests that the choice of contractual form is irrelevant in the environment studied in this paper. Comparative static analyses of optimal contracts generate several testable hypotheses.

JEL-codes: D82 G32 J33 (search for similar items in EconPapers)
Date: 1999
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bportugal.pt/sites/default/files/anexos/papers/wp199903.pdf

Related works:
Working Paper: Optimal Executive Compensation: Bonus, Golden Parachutes, Stock Ownership and Stock Options (1999)
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:ptu:wpaper:w199903

Access Statistics for this paper

More papers in Working Papers from Banco de Portugal, Economics and Research Department Contact information at EDIRC.
Bibliographic data for series maintained by DEE-NTD ().