Managing Employee Compensation Risk

Managing Employee Compensation Risk We analyze a principal-agent model in which the principal (e.g., shareholders) and the agent (e.g., an employee) can personally trade securities tied to the outcome of an uncontrollable event affecting output. The model is employed to address two questions. First, under what conditions does compensation risk management at the individual level substitute for compensation risk management at the firm level? Second, if compensation risk management at the firm level is optimal, how should the compensation risk be managed? http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Managing Employee Compensation Risk

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by Kluwer Academic Publishers
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1023/A:1009685921612
Publisher site
See Article on Publisher Site

Abstract

We analyze a principal-agent model in which the principal (e.g., shareholders) and the agent (e.g., an employee) can personally trade securities tied to the outcome of an uncontrollable event affecting output. The model is employed to address two questions. First, under what conditions does compensation risk management at the individual level substitute for compensation risk management at the firm level? Second, if compensation risk management at the firm level is optimal, how should the compensation risk be managed?

Journal

Review of Accounting StudiesSpringer Journals

Published: Sep 30, 2004

References

  • Risk Management: Coordinating Corporate Investment and Financing Policies
    Froot, K.; Scharfstein, D.; Stein, J.

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