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| Author: | Wang, C. |
| Title: | Incentives, CEO compensation, and shareholder wealth in a dynamic agency model |
| Journal: | Journal of Economic Theory
1997 : SEP, VOL. 76:1, p. 72-105 |
| Index terms: | CHIEF EXECUTIVE OFFICERS COMPENSATION INCENTIVES SHAREHOLDERS WEALTH AGENCY THEORY |
| Language: | eng |
| Abstract: | Jensen and Murphy (1990) argue that the observed pay-performance sensitivity is too low to be consistent with formal agency theory. This study uses a dynamic agency model to provide a resolution of Jensen's and Murphy's puzzle. It was found that the dynamic agency model is consistent with a variety of outcomes concerning Jens and Murphy's pay-performance sensitivy. There are circumstances where the pay-performance is positive and others where pay-performance is negative, depending on the parameter values of the model and the initial distribution of the CEOs' expected discounted utilities. |
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