Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18687
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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 cashflow of the firms they manage. This correlation exposes managers to risk and hence givesthem an incentive to hedge against the poor performance of their firms. We study the agencyproblem between shareholders and a manager when the manager can hedge his incentivecompensation using financial markets and shareholders cannot perfectly monitor themanager?s portfolio in order to keep him from hedging the risk in his compensation. Inparticular, shareholders can monitor the manager?s portfolio stochastically, and sincemonitoring is costly governance is imperfect. If managerial hedging is detected, shareholderscan seize the payoffs of the manager?s trades. We show that at the optimal contract: (i) themanager?s portfolio is monitored only when the firm performs poorly, (ii) the more costlymonitoring 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 hisportfolio is monitored, even if no hedging is revealed by monitoring.en_US
dc.language.isoengen_US
dc.publisher|aCenter for Economic Studies and Ifo Institute (CESifo) |cMunichen_US
dc.relation.ispartofseries|aCESifo working papers |x1322en_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-

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