报告：Relative Wealth Concerns and Executive Compensation

报告人：Qi Liu (Wharton School, University of Pennsylvania)

时间：2012年2月17日（周五）10:20-11:30am

地点：成人直播新楼217教室

摘要：Empirical studies find that relative wealth concerns (RWCs) affect CEO compensation. In this paper, I incorporate RWCs into a standard principal-agent model and study the implications on CEO compensation. I first study the case in which a CEO's effort increases firm value without changing firm risk. In this case, RWCs will result in an increase in CEO incentives. This effect is larger if aggregate risk is higher, so RWCs can lead to a positive relation between CEO incentives and aggregate risk. CEOs with RWCs willingly risk exposure to aggregate shock to keep up with their peers. This help to reduce risk premium paid to the CEOs. As a result, RWCs can be beneficial to shareholders' payoffs. I also provide a simple explanationfor the pay-for-luck puzzle. I next examine the case in which the CEO's effort affects both the mean and variance of firm value. I show that RWCs provide incentives for a CEO to take risk; thus if a firm's compensation policy has a large influence on other CEOs' risk-taking actions, then low (risk-taking) incentives can be optimal. Lastly, I show that RWCs render options preferable to stock where aggregate risk is much larger than idiosyncratic risk.

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