Uncertainty, Risk, and Incentives: Theory and Evidence

• 成果类型: Article
• 署名作者: He, Zhiguo; Li, Si; Wei, Bin; Yu, Jianfeng
• 署名单位: University of Chicago; Wilfrid Laurier University; Tsinghua University; Federal Reserve System - USA; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1744
• 发表日期: 2014
• 页码: 206-226
• 关键词: Executive compensation; optimal contracting; learning; uncertainty; risk-incentive trade-off

摘要

Uncertainty has qualitatively different implications than risk in studying executive incentives. We study the interplay between profitability uncertainty and moral hazard, where profitability is multiplicative with managerial effort. Investors who face greater uncertainty desire faster learning, and consequently offer higher managerial incentives to induce higher effort from the manager. In contrast to the standard negative risk-incentive trade-off, this learning-by-doing effect generates a positive relation between profitability uncertainty and incentives. We document empirical support for this prediction.