search query: @author Campbell, T. S. / total: 10
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| Author: | Campbell, T. S. Kracaw, W. A. |
| Title: | Optimal managerial incentive contracts and the value of corporate insurance. |
| Journal: | Journal of Financial and Quantitative Analysis
1987 : SEP, VOL. 22:3, p. 315-328 |
| Index terms: | MANAGERS INCENTIVES HEDGING CAPITAL INVESTMENT |
| Language: | eng |
| Abstract: | We study the impact of managerial hedging on shareholder wealth when managers are able to choose the level of efforts they expend in managing firms' investments. It is shown that shareholders prefer managers to hedge observable unsystematic risks because they expect that this will induce the managers to be more productive. First we analyze the case where the risk being hedged is independent of the managerial effort. Next we investigate the case when the insurable risk depends on managerial effort. In the first case the shareholders can induce optimality, but in the second case the optimal contract may mean over or under insurance by the manager w.r.t. that preferred to the shareholders. |
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