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dc.contributor.authorBisin, Albertoen_US
dc.contributor.authorGottardi, Pieroen_US
dc.contributor.authorRampini, Adriano A.en_US
dc.date.accessioned2009-01-28T15:52:10Z-
dc.date.available2009-01-28T15:52:10Z-
dc.date.issued2004en_US
dc.identifier.urihttp://hdl.handle.net/10419/18687-
dc.description.abstractIncentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their firms. We study the agency problem between shareholders and a manager when the manager can hedge his incentive compensation using financial markets and shareholders cannot perfectly monitor the manager?s portfolio in order to keep him from hedging the risk in his compensation. In particular, shareholders can monitor the manager?s portfolio stochastically, and since monitoring is costly governance is imperfect. If managerial hedging is detected, shareholders can seize the payoffs of the manager?s trades. We show that at the optimal contract: (i) the manager?s portfolio is monitored only when the firm performs poorly, (ii) the more costly monitoring is, the more sensitive is the manager?s compensation to firm performance, and (iii) conditional on the firm?s performance, the manager?s compensation is lower when his portfolio is monitored, even if no hedging is revealed by monitoring.en_US
dc.language.isoengen_US
dc.publisheren_US
dc.relation.ispartofseriesCESifo working papers 1322en_US
dc.subject.jelG30en_US
dc.subject.jelD82en_US
dc.subject.ddc330en_US
dc.subject.keywordexecutive compensationen_US
dc.subject.keywordincentivesen_US
dc.subject.keywordmonitoringen_US
dc.subject.keywordcorporate governanceen_US
dc.subject.stwFührungskräfteen_US
dc.subject.stwLeistungsorientierte Vergütungen_US
dc.subject.stwAktienoptionsplanen_US
dc.subject.stwHedgingen_US
dc.subject.stwPortfolio-Managementen_US
dc.subject.stwLeistungskontrolleen_US
dc.subject.stwAgency Theoryen_US
dc.subject.stwTheorieen_US
dc.titleManagerial hedging and portfolio monitoringen_US
dc.typeWorking Paperen_US
dc.identifier.ppn477399665en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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