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Industrial Structure, Executives' Pay And Myopic Risk Taking.

Abstract:

This study outlines a new theory linking industrial structure to optimal employment contracts and value reducing risk taking. Firms hire their executives using optimal contracts derived within a competitive labour market. To motivate effort firms must use some variable remuneration. Such remuneration introduces a myopic risk taking problem: an executive would wish to inflate early expected earnings at some risk to future profits. To manage this some bonus pay is deferred. Convergence in ...

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Publisher:
Department of Economics (University of Oxford)
Series:
Discussion paper series
Publication date:
2011-01-01
Language:
English
UUID:
uuid:80ece22e-f47c-4aed-84fe-5a9038373589
Local pid:
oai:economics.ouls.ox.ac.uk:15261
Deposit date:
2011-12-15

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