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High-powered incentives and fraudulent behavior: Stock-based versus stock option-based compensation

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  • Andergassen, Rainer

Abstract

This paper examines the trade-off shareholders face between providing managers with incentives to exert beneficial effort and to engage in costly fraudulent activity. We provide a solution to the optimal compensation problem, given that shareholders can either grant (restricted) stock or stock options and given fixed average compensation costs.

Suggested Citation

  • Andergassen, Rainer, 2008. "High-powered incentives and fraudulent behavior: Stock-based versus stock option-based compensation," Economics Letters, Elsevier, vol. 101(2), pages 122-125, November.
  • Handle: RePEc:eee:ecolet:v:101:y:2008:i:2:p:122-125
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    Cited by:

    1. Rudy Santore & Martin Tackie, 2013. "Stock option contract design and managerial fraud," Economics Bulletin, AccessEcon, vol. 33(2), pages 1283-1289.
    2. Cheng-Feng Cheng, 2012. "Evaluate the Effectiveness of Manager Compensation," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 11(1), pages 25-44, June.
    3. Wu, Yan Wendy, 2011. "Optimal executive compensation: Stock options or restricted stocks," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 633-644, October.
    4. Andergassen, Rainer, 2016. "Managerial compensation, product market competition and fraud," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 1-15.
    5. Yin-Hua Yeh & Zih-Heng Lai, 2014. "The Causes and Risk-Taking on the Change of CEO Equity-Based Compensation Structure," Business and Economic Research, Macrothink Institute, vol. 4(2), pages 30-48, December.

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