Explaining the structure of CEO incentive pay with decreasing relative risk aversion
Chaigneau, P.
(2011).
Explaining the structure of CEO incentive pay with decreasing relative risk aversion.
(Financial Markets Group Discussion Papers 693).
Financial Markets Group, The London School of Economics and Political Science.
It is established that the standard principal-agent model cannot explain the structure of commonly used CEO compensation contracts if CRRA preferences are postulated. However, we demonstrate that this model has potentially a high explanatory power with preferences with decreasing relative risk aversion, in the sense that a typical CEO contract is approximately optimal for plausible preference parameters.
| Item Type | Working paper |
|---|---|
| Copyright holders | © 2011 The Authors |
| Departments | LSE > Research Centres > Financial Markets Group |
| Date Deposited | 29 Jun 2023 |
| URI | https://researchonline.lse.ac.uk/id/eprint/119059 |