Incentives and performance in the presence of wealth effects and endogenous risk

• 成果类型: Article
• 署名作者: Guo, Ming; Ou-Yang, Hui
• 署名单位: Duke University; Duke University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2004.07.010
• 发表日期: 2006
• 页码: 150-191
• 关键词: Agency theory; incentives and performance; Endogenous risk; wealth effects

摘要

Two of the most widely tested predictions of agency theory are that there exists a negative association between an agent's pay-performance sensitivity (PPS) and the risk of output, and that PPS enhances performance. Empirical evidence has been mixed. This paper proposes a new utility function and develops a model that introduces a wealth effect and also allows the agent to control the (idiosyncratic) risk of output. When risk is endogenous, the paper shows that the two predictions may not hold. (c) 2005 Elsevier Inc. All rights reserved.