Uncertainty, investment, and managerial incentives

• 成果类型: Article
• 署名作者: Glover, Brent; Levine, Oliver
• 署名单位: Carnegie Mellon University; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2014.11.004
• 发表日期: 2015
• 页码: 121-137
• 关键词: Corporate investment; uncertainty; Agency conflicts; Executive compensation; idiosyncratic volatility

摘要

This study provides evidence that managerial incentives, shaped by compensation contracts, help to explain the empirical relationship between uncertainty and investment. We develop a model in which the manager, compensated with an equity-based contract, makes investment decisions for a firm that faces time-varying volatility. The contract creates incentives that affect both the sign and magnitude of a manager's optimal response to volatility shocks. The model is calibrated using compensation data to quantify this predicted investment response for a large panel of firms. Our estimates help explain the variation in firm-level investment responses to volatility shocks observed in the data. (C) 2014 Elsevier B.V. All rights reserved.