期刊
MANAGEMENT SCIENCE
卷 60, 期 1, 页码 206-226出版社
INFORMS
DOI: 10.1287/mnsc.2013.1744
关键词
executive compensation; optimal contracting; learning; uncertainty; risk-incentive trade-off
资金
- Social Sciences and Humanities Research Council of Canada
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.
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