The Effect of Risk on the CEO Market

• 成果类型: Article
• 署名作者: Edmans, Alex; Gabaix, Xavier
• 署名单位: University of Pennsylvania; New York University; Centre for Economic Policy Research - UK; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhq153
• 发表日期: 2011
• 页码: 2822
• 关键词: optimal incentive contracts; continuous-time; EQUITY GRANTS; principal; COMPENSATION; COMPETITION; selection; MODEL; PAID; pay

摘要

This article presents a market equilibrium model of CEO assignment, pay, and incentives under risk aversion and moral hazard. Each of the three outcomes can be summarized by a single closed-form equation. In the presence of moral hazard, assignment is distorted from positive assortative matching on firm size as firms with higher risk or disutility choose less talented CEOs. Such firms also pay higher salaries in the cross-section, but economy-wide increases in risk or the disutility of being a CEO do not affect pay. The strength of incentives depends only on the disutility of effort and is independent of risk and risk aversion. If the CEO can affect firm risk, incentives rise and are increasing in risk and risk aversion. We calibrate the losses from various forms of poor corporate governance, such as failures in monitoring and inefficiencies in CEO assignment.