search query: @author Cvitanic, J. / total: 2
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| Author: | Cadenillas, A. Cvitanic, J. Zapatero, F. |
| Title: | Leverage decision and manager compensation with choice of effort and volatility |
| Journal: | Journal of Financial Economics
2004 : JUL, VOL. 73:1, p. 71-92 |
| Index terms: | Finance Capital structure of companies Gearing Managers Compensation Pay Stocks Control |
| Language: | eng |
| Abstract: | This paper deals with the incentive effects of granting levered or unlevered stock to a risk-averse manager (hereafter as: mgr). The stock is granted by risk-neutral shareholders (here as: s-hs.) who choose leverage and compensation (here as: comp.) level. The mgr. applies costly effort and selects the level of volatility (here as: vol.), both of which affect expected return (here as: exp-ret). The results are driven by the attempt of the risk-neutral s-hs. to maximize the value of their claims net of the comp. package. A dynamic setting is considered and it is found that levered stock is optimal for high-type mgrs., firms with high momentum, large firms, and firms for which additional vol. only implies a modest increase in exp-ret. |
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