Optimal compensation and pay-performance sensitivity in a continuous-time principal-agent model / Nengjiu Ju in Management science, Vol. 58 N° 3 (Mars 2012)  

Public ISBD [article]  inManagement science > Vol. 58 N° 3 (Mars 2012) . - pp. 641-657 Titre : Optimal compensation and pay-performance sensitivity in a continuous-time principal-agent model Type de document : texte imprimé Auteurs : Nengjiu Ju, Auteur ; Xuhu Wan, Auteur Année de publication : 2012 Article en page(s) : pp. 641-657 Note générale : Management Langues : Anglais (eng) Mots-clés : Continuous-time principal-agent models Optimal concave contract Stochastic optimal effort Pay-performance sensitivity Résumé : This paper studies the optimal contract between risk-neutral shareholders and a constant relative risk-aversion manager in a continuous-time model. Several interesting results are obtained. First, the optimal compensation is increasing but concave in output value if the manager is more risk averse than a log-utility manager. Second, when the manager has a log utility, a linear contract is optimal when there is no explicit lower bound on the compensation, and an option contract is optimal when there is an explicit lower bound. Third, optimal effort is stochastic (state dependent). Fourth, consistent with empirical findings and contrary to standard agency theory predictions, the relationship between pay-performance sensitivity and firm performance and that between pay-performance sensitivity and firm risk can be nonmonotonic. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/3.toc [article] Optimal compensation and pay-performance sensitivity in a continuous-time principal-agent model [texte imprimé] / Nengjiu Ju, Auteur ; Xuhu Wan, Auteur . - 2012 . - pp. 641-657. Management Langues : Anglais (eng) in Management science > Vol. 58 N° 3 (Mars 2012) . - pp. 641-657 Mots-clés : Continuous-time principal-agent models Optimal concave contract Stochastic optimal effort Pay-performance sensitivity Résumé : This paper studies the optimal contract between risk-neutral shareholders and a constant relative risk-aversion manager in a continuous-time model. Several interesting results are obtained. First, the optimal compensation is increasing but concave in output value if the manager is more risk averse than a log-utility manager. Second, when the manager has a log utility, a linear contract is optimal when there is no explicit lower bound on the compensation, and an option contract is optimal when there is an explicit lower bound. Third, optimal effort is stochastic (state dependent). Fourth, consistent with empirical findings and contrary to standard agency theory predictions, the relationship between pay-performance sensitivity and firm performance and that between pay-performance sensitivity and firm risk can be nonmonotonic. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/3.toc

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