Gibson Brandon Ryabkov

Fakultäten » Wirtschaftswissenschaftliche Fakultät » Banking und Finance, Institut für » Prof. Dr. Rajna Gibson (ausgetreten) » Gibson Brandon Ryabkov

Completed research project

Title / Titel	Ambiguity Aversion in Executive Compensation Contracts
PDF	Abstract (PDF, 14 KB)
Summary / Zusammenfassung	The standard principal-agent models of optimal contract design poorly explain existing practice of executive pay, in particular, a large holding of stock options. In order to capture the option-like profile of executive compensation, the paper proposes to consider ambiguity averse manager who takes into account model misspecification in his decision making process. The paper analyzes the effect of ambiguity aversion on the optimal structure of equity based managerial compensation plans in the form of stock options in continuous-time moral hazard model. The results of the paper predict that the optimal contract should contain more risk-taking incentives in a form of executive stock options in order to mitigate the ambiguity aversion of manager.
Keywords / Suchbegriffe	Ambiguity, optimal contract, executive compensation, executive stock options
Project leadership and contacts / Projektleitung und Kontakte	Prof. Rajna Gibson Brandon (Project Leader) rgibson@isb.uzh.ch Nikolay Ryabkov (Project Leader) ryabkov@isb.uzh.ch
Funding source(s) / Unterstützt durch	Universität Zürich (position pursuing an academic career)
Duration of Project / Projektdauer	Sep 2005 to Nov 2008