Paying for observable luck
Metadatos
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https://doi.org/10.1111/j.1756-2171.2011.00138.x |
Metadatos
Título
Paying for observable luckAutoría
Fecha de publicación
2011-05-30Editor
WileyISSN
0741-6261; 1756-2171Cita bibliográfica
FERIOZZI, Fabio. Paying for observable luck. The RAND Journal of Economics, 2011, vol. 42, no 2, p. 387-415.Tipo de documento
info:eu-repo/semantics/articleVersión de la editorial
https://onlinelibrary.wiley.com/doi/10.1111/j.1756-2171.2011.00138.xVersión
info:eu-repo/semantics/publishedVersionResumen
This article examines why CEOs are rewarded for luck, namely for observable shocks beyond their control. I propose a simple hidden action model where the agent has implicit incentives to avoid bankruptcy. After signing ... [+]
This article examines why CEOs are rewarded for luck, namely for observable shocks beyond their control. I propose a simple hidden action model where the agent has implicit incentives to avoid bankruptcy. After signing the contract, but before acting, the agent observes a signal on future luck. Implicit incentives are weaker after good news, and call for higher pay-for-performance sensitivity in good times. As a result, managerial pay is tied to luck. The model is also consistent with recent evidence of asymmetric pay for luck, that is, a larger exposure of managerial pay to good luck than to bad. [-]
Publicado en
The RAND Journal of Economics, 22011, 42, 2Derechos de acceso
CopyrightC©2011, RAND387
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