Own-company stockholding and work effort preferences of an unconstrained executive

  • We develop a framework for analyzing an executive’s own-company stockholding and work effort preferences. The executive, characterized by risk aversion and work effectiveness parameters, invests his personal wealth without constraint in the financial market, including the stock of his own company whose value he can directly influence with work effort. The executive’s utility-maximizing personal investment and work effort strategy is derived in closed-form, and an indifference utility rationale is demonstrated to determine his required compensation. Our results have implications for the practical and theoretical assessment of executive quality and the benefits of performance contracting. Assuming knowledge of the company’s non-systematic risk, our executive’s unconstrained own-company investment identifies his work effectiveness (i.e. quality), and also reflects work effort that establishes a base-level that performance contracting should seek to exceed.

Volltext Dateien herunterladen

Metadaten exportieren

  • Export nach Bibtex
  • Export nach RIS

Weitere Dienste

Teilen auf Twitter Suche bei Google Scholar
Metadaten
Verfasserangaben:S. Desmettre, J. Gould, A. Szimayer
URN (Permalink):urn:nbn:de:hbz:386-kluedo-15776
Schriftenreihe (Bandnummer):Berichte des Fraunhofer-Instituts für Techno- und Wirtschaftsmathematik (ITWM Report) (146)
Dokumentart:Bericht
Sprache der Veröffentlichung:Englisch
Jahr der Fertigstellung:2008
Jahr der Veröffentlichung:2008
Veröffentlichende Institution:Fraunhofer-Institut für Techno- und Wirtschaftsmathematik
Datum der Publikation (Server):03.11.2008
Freies Schlagwort / Tag:executive compensation; optimal portfolio choice
GND-Schlagwort:executive compensation; optimal portfolio choice
Fachbereiche / Organisatorische Einheiten:Fraunhofer (ITWM)
DDC-Sachgruppen:5 Naturwissenschaften und Mathematik / 51 Mathematik / 510 Mathematik
Lizenz (Deutsch):Standard gemäß KLUEDO-Leitlinien vor dem 27.05.2011

$Rev: 13581 $