Executive compensation: a calibration approach
AbstractWe use a version of the Grossman and Hart principal-agent model with 10 actions and 10 states to produce quantitative predictions for executive compensation. Performance incentives derived from the model are compared with the performance incentives of 350 firms chosen from a survey by Michael Jensen and Kevin Murphy. The results suggest both that the model does a reasonable job of explaining the data and that actual incentives are close to the optimal incentives predicted by theory.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 12 (1998)
Issue (Month): 3 ()
Note: Received: August 12, 1997; revised version: October 27, 1997
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Web page: http://link.springer.de/link/service/journals/00199/index.htm
Other versions of this item:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
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