Year: 2006
Type: preprint
Abstract: A main prediction of agency theory is the well known risk-incentive trade-off. Incentive contracts should be found in environments with little uncertainty and for agents with low degrees of risk aversion. There is an ongoing debate in the literature about the first trade-off. Due to lack of data, there has so far been hardly any empirical evidence about the second. Making use of a unique representative data set, we find clear evidence that risk aversion has a highly significant and substantial negative impact on the probability that an employee's pay is performance contingent.
Authors: Grund, Christian, Sliwka, Dirk
Institutions: RWTH Aachen University, University of Cologne
Language: English
Subfield: Management Information Systems
Domain: Social Sciences
Open Access status: green
Award: G577476671
OpenAlex ID: W2153227671