Year: 2015
Type: article
Abstract: ABSTRACT Many finance jobs entail the risk of large losses, and hard‐to‐monitor effort. We analyze the equilibrium consequences of these features in a model with optimal dynamic contracting. We show that finance jobs feature high compensation, up‐or‐out promotion, and long work hours, and are more attractive than other jobs. Moral hazard problems are exacerbated in booms, even though pay increases. Employees whose talent would be more valuable elsewhere can be lured into finance jobs, while the most talented employees might be unable to land these jobs because they are “too hard to manage.”
Source: The Journal of Finance
DOI: 10.1111/jofi.12244
Authors: ULF AXELSON, PHILIP BOND
Institutions: Boston University, University of Minnesota, Federal Reserve Bank of Minneapolis, Stockholm School of Economics in Riga, Cornell University, University of Exeter, University of Oxford, University of Chicago, University of Houston, The Ohio State University, London Business School, Carnegie Mellon University, University of Glasgow, The University of Texas at Austin, Michigan State University
Language: English
Topic: Economic theories and models
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2126478586