Abstract

Citations (5)

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Executive Compensation: A Calibration Approach

Joseph G. Haubrich
Federal Reserve Bank of Cleveland

Ivilina Popova
Purdue University - Krannert School of Management

Abstract:
We use a version of the Grossman and Hart principal-agent model with 10 actions and 10 states to produce quantitative predictions for executive compensation. Performance incentives derived from the model are compared with the performance incentives of 350 firms chosen from a survey by Michael Jensen and Kevin Murphy. The results suggest both that the model does a reasonable job of explaining the data and that actual incentives are close to the optimal incentives predicted by theory.

JEL Classifications: J33

Working Paper Series

Date posted: December 20, 1998 ; Last revised: December 30, 1998

Suggested Citation

Haubrich, Joseph G. and Popova, Ivilina, Executive Compensation: A Calibration Approach. Available at SSRN: http://ssrn.com/abstract=6856

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Contact Information

Joseph G. Haubrich (Contact Author) Federal Reserve Bank of Cleveland ( email ) East 6th & Superior Cleveland, OH 44101-1387 United States 216-579-2802 (Phone) 216-579-3050 (Fax)
Ivilina Popova Purdue University - Krannert School of Management 1310 Krannert Building West Lafayette, IN 47907-1310 United States +1 765 49-49013 (Phone)

Abstract

Citations (5)

Date posted: December 20, 1998 ; Last revised: December 30, 1998

Suggested Citation

Contact Information

Joseph G. Haubrich (Contact Author)

Ivilina Popova