Risk Premia in Executive Compensation: A Life-Cycle Perspective

摘要: This paper employs a life-cycle model of consumption and saving to study risk premia in CEO compensation, compares them variation observed pay levels. The incorporates the main types income savings that executives public corporations typically face: option- stock-based pay, pay-performance sensitivity, dismissal risk, stock return volatility. A calibration large panel US CEOs shows that, for realistic degrees aversion, can explain about 20 percent cross-sectional between 10 evolution average levels over time. Thus, increases exposures only partially surge executive past decades. In contrast, captures very well skewness distribution.