Optimal project deadlines for mean-variance incentive contract designs

El-Tannir, Akram A.

doi:10.1016/j.cie.2019.106018

Cited by 5 publications

(2 citation statements)

References 28 publications

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“…Specifically, the bonus coefficient associated with stock value α AI v (β) is increasing in β that a manager with higher fairness preference is better compensated with stock shares. This finding is counterintuitive since it probably induces information overstatement, and is inconsistent with standard mean-variance contracts, which compensate less for more fairness-preferred agents [13]. We figure out the driving mechanisms for increasing the equity-based incentives by exploring the variations of managerial effort devotion.…”

Section: Neutral Fairness Preferencementioning

confidence: 80%

Equity-based incentive to coordinate shareholder-manager interests under information asymmetry

Zhou

Yao

Zhou

et al. 2022

JIMO

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<p style='text-indent:20px;'>The shareholder's interest oriented from business operation relies on opportunism regulation of the manager under asymmetry. Effective motivation incentives should be exploited to facilitate the manager's effort devotion enthusiasms. This paper establishes a theoretic model in which the shareholder offers equity-based incentive to a fairness-preferred manager to coordinate their interest conflicts and maximize her expected revenue. The manager exerts unverifiable levels of efforts toward both decision and coordination tasks making the most of his private information about fairness preference. Two interrelated performance measures on different hierarchical levels are considered for contracting purposes. In each situation, we derive the equilibrium effort choices and incentive coefficients of both participants, and investigate how these decisions are affected by fairness preference. Research findings suggest that the incorporation of firm equity dominates pure profit incentive in eliciting high effort levels toward two distinctive managerial tasks. Besides, the equity-based incentive weakens the perceived unfairness and facilitates the participants' expected revenue. Comparative statics and numerical analysis are conducted to demonstrate our results and the effectiveness of the proposed equity-based incentive. Finally, we summarize the contributions of this paper and put forward directions for further study.</p>

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Section: Neutral Fairness Preferencementioning

confidence: 80%

Equity-based incentive to coordinate shareholder-manager interests under information asymmetry

Zhou

Yao

Zhou

et al. 2022

JIMO

View full text Add to dashboard Cite

show abstract

“…In these situations, the deadline becomes part of the target to be reached and according to the type of incentive scheme used it can be optimal to set different deadlines (El-Tannir, 2019). Individuals may be more or less likely to enter into such types of contracts depending on the bonus/penalty framing of the incentive scheme.…”

Section: Introductionmentioning

confidence: 99%