Own-company stockholding and work effort preferences of an unconstrained executive
We develop a framework for analyzing an executive's own-company stockholding and work effort preferences. The executive, characterized by risk aversion and work effectiveness parameters, invests his personal wealth without constraint in the financial market, including the stock of his own compa...
| Main Authors: | , , |
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| Format: | Journal Article |
| Published: |
Springer Berlin Heidelberg
2010
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| Subjects: | |
| Online Access: | http://hdl.handle.net/20.500.11937/30229 |
| _version_ | 1848753028492951552 |
|---|---|
| author | Desmettre, S. Gould, John Szimayer, A. |
| author_facet | Desmettre, S. Gould, John Szimayer, A. |
| author_sort | Desmettre, S. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | We develop a framework for analyzing an executive's own-company stockholding and work effort preferences. The executive, characterized by risk aversion and work effectiveness parameters, invests his personal wealth without constraint in the financial market, including the stock of his own company whose value he can directly influence with work effort. The executive's utility-maximizing personal investment and work effort strategy is derived in closed form, and a utility indifference rationale is applied to determine his required compensation. Being unconstrained byperformance contracting, the executive's work effort strategy establishes a base case for theoretical or empirical assessment of the benefits or otherwise of constraining executives with performance contracting. |
| first_indexed | 2025-11-14T08:18:00Z |
| format | Journal Article |
| id | curtin-20.500.11937-30229 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T08:18:00Z |
| publishDate | 2010 |
| publisher | Springer Berlin Heidelberg |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-302292017-09-13T16:08:47Z Own-company stockholding and work effort preferences of an unconstrained executive Desmettre, S. Gould, John Szimayer, A. Optimal portfolio choice Executive compensation We develop a framework for analyzing an executive's own-company stockholding and work effort preferences. The executive, characterized by risk aversion and work effectiveness parameters, invests his personal wealth without constraint in the financial market, including the stock of his own company whose value he can directly influence with work effort. The executive's utility-maximizing personal investment and work effort strategy is derived in closed form, and a utility indifference rationale is applied to determine his required compensation. Being unconstrained byperformance contracting, the executive's work effort strategy establishes a base case for theoretical or empirical assessment of the benefits or otherwise of constraining executives with performance contracting. 2010 Journal Article http://hdl.handle.net/20.500.11937/30229 10.1007/s00186-010-0322-5 Springer Berlin Heidelberg fulltext |
| spellingShingle | Optimal portfolio choice Executive compensation Desmettre, S. Gould, John Szimayer, A. Own-company stockholding and work effort preferences of an unconstrained executive |
| title | Own-company stockholding and work effort preferences of an unconstrained executive |
| title_full | Own-company stockholding and work effort preferences of an unconstrained executive |
| title_fullStr | Own-company stockholding and work effort preferences of an unconstrained executive |
| title_full_unstemmed | Own-company stockholding and work effort preferences of an unconstrained executive |
| title_short | Own-company stockholding and work effort preferences of an unconstrained executive |
| title_sort | own-company stockholding and work effort preferences of an unconstrained executive |
| topic | Optimal portfolio choice Executive compensation |
| url | http://hdl.handle.net/20.500.11937/30229 |