Advanced Search
MyIDEAS: Login

Optimal Compensation Contracts For Optimistic Managers

Contents:

Author Info

  • Giovanni Immordino

    ()
    (Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno)

  • Anna Maria C. Menichini

    ()
    (Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno)

  • Maria Grazia Romano

    ()
    (Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno)

Abstract

We study an employment contract between an (endogenously) optimistic manager and realistic investors. The manager faces a trade-off between ensuring that effort reflects accurate news and savoring emotionally beneficial good news. Investors and manager agree on optimal recollection when the weight the manager attaches to anticipatory utility is small. For intermediate values investors bear an extra-cost to make the manager recall bad news. For large weights investors renounce inducing signal recollection. We extend the analysis to the case in which anticipatory utility is the manager’s private information and derive testable predictions on the relationship between personality traits, managerial compensation and recruitment policies

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.dises.unisa.it/RePEc/sep/wpaper/3_224.pdf
File Function: First version, 2012
Download Restriction: no

Bibliographic Info

Paper provided by Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno in its series Working Papers with number 3_224.

as in new window
Length:
Date of creation: Nov 2012
Date of revision:
Publication status: Published in Working Papers, november 2012, pages 1-29
Handle: RePEc:sep:wpaper:3_224

Contact details of provider:
Postal: Via Ponte Don Melillo - 84084 Fisciano (SA)
Phone: 089-963132
Fax: 089-962049
Email:
Web page: http://www.dises.unisa.it
More information through EDIRC

Related research

Keywords: Over-optimism; managerial compensation; anticipatory utility;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 529-44, July.
  2. De Meza, D. & Southey, C., 1995. "The Borrower's Curse: Optimism, Finance and Enterpreneurship," Discussion Papers 9502, Exeter University, Department of Economics.
  3. Ham, Roger & Junankar, Pramod N. (Raja) & Wells, Robert, 2009. "Antagonistic Managers, Careless Workers and Extraverted Salespeople: An Examination of Personality in Occupational Choice," IZA Discussion Papers 4193, Institute for the Study of Labor (IZA).
  4. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
  5. Hanming Fang & Giuseppe Moscarini, 2003. "Morale Hazard," Cowles Foundation Discussion Papers 1422, Cowles Foundation for Research in Economics, Yale University.
  6. Augustin Landier & David Thesmar, 2009. "Financial Contracting with Optimistic Entrepreneurs," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 117-150, January.
  7. Roland Benabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Wiley Blackwell, vol. 70(3), pages 489-520, 07.
  8. Caplin, Andrew & Leahy, John, 1997. "Psychological Expected Utility Theory and Anticipatory Feelings," Working Papers 97-37, C.V. Starr Center for Applied Economics, New York University.
  9. Cooper, Arnold C. & Woo, Carolyn Y. & Dunkelberg, William C., 1988. "Entrepreneurs' perceived chances for success," Journal of Business Venturing, Elsevier, vol. 3(2), pages 97-108.
  10. Melissa Osborne & Herbert Gintis & Samuel Bowles, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December.
  11. Julio Rotemberg & Garth Saloner, 2000. "Visionaries, Managers, and Strategic Direction," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 693-716, Winter.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:sep:wpaper:3_224. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maria Rizzo).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.