A Multiplicative Model of Optimal CEO Incentives in Market Equilibrium

摘要: This paper presents a unified theory of both the level and sensitivity pay in competitive market equilibrium, by embedding moral hazard problem into talent assignment model. By considering multiplicative specifications for CEO’s utility production functions, we generate number different results from traditional additive models. First, low fractional ownership (the Jensen–Murphy incentives measure) its negative relationship with firm size can be quantitatively reconciled optimal contracting, thus need not reflect rent extraction. Second, dollar change wealth percentage value, divided annual pay, is independent size, therefore desirable empirical measure incentives. Third, incentive effective at solving agency problems impacts on such as strategy choice. However, issues perk consumption are best addressed through direct monitoring. (JEL D2, D3, G34, J3)