Title :
Analysis for the optimal contract with stock grants
Author :
Ma, Wei-min ; Lin, Wu-ji ; Yu, Zhi-fang
Author_Institution :
Sch. of Econ. & Manage., Tongji Univ., Shanghai
Abstract :
The research on the optimal design of securities grants is still in its infancy. In this paper, a simple dynamic model of the relationship between a firm and its chief executive officer is established. The optimal long-term compensation with limited commitment is analyzed under complete information. The main result is that, in the environment of symmetric information, managerpsilas continuation utility is equal to his reservation utility. If stock grants are not used as deferred compensation, the optimal contract collapses to a series of short term contracts. When stock grants are used, however, inclusion of stock grants in the compensation package could not be implemented to achieve higher firm value.
Keywords :
contracts; organisational aspects; stock markets; chief executive officer; firm value; optimal contract analysis; optimal long-term compensation; stock grants; symmetric information; Conference management; Contracts; Cybernetics; Economic forecasting; Environmental economics; Information analysis; Machine learning; Security; Space technology; Technology management; Executive stock grants; Moral hazard; Optimal contract; Symmetric information;
Conference_Titel :
Machine Learning and Cybernetics, 2008 International Conference on
Conference_Location :
Kunming
Print_ISBN :
978-1-4244-2095-7
Electronic_ISBN :
978-1-4244-2096-4
DOI :
10.1109/ICMLC.2008.4620676
