Performance Evaluation, Managerial Hedging, and Contract Termination

Autor:	Yu Huang, Nengjiu Ju, Hao Xing
Rok vydání:	2022
Předmět:	Strategy and Management Management Science and Operations Research
Zdroj:	Management Science.
ISSN:	1526-5501 0025-1909
DOI:	10.1287/mnsc.2022.4533
Popis:	We develop a dynamic model where a principal contracts with an agent to operate a firm. The agent, protected by limited liability, trades privately a market portfolio to hedge market risk in his compensation. When liquidation cost of the firm is proportional to its size, the principal manages the termination risk by loading the contract with a positive market component, which alleviates termination risk in normal market conditions but makes termination more likely after negative market shocks. The optimal contract displays a dynamic mixture of absolute and relative performance evaluations and is implemented using a dynamic deferred compensation account. This paper was accepted by Agostino Capponi, finance.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::ccc991b22efd5a36ab099e18836a1742 https://doi.org/10.1287/mnsc.2022.4533 Zobrazit plný text záznamu