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|Title:||The Risk and Incentives Trade-off in the Presence of Heterogeneous Managers|
|Authors:||Wright, Donald J.|
|Publisher:||School of Economics|
|Abstract:||Agency theory predicts a negative relationship between risk and incentives, yet recent empirical evidence has not consistently found such a relationship. In fact, some researchers have found a positive relationship. By introducing competition for heterogeneous managers, who differ in their degrees of risk aversion, into a standard agency model, this paper demonstrates that a negative or positive relationship is theoretically possible. Which arises depends on the relative risk aversion parameters of the managers and the absolute and relative riskiness of the environments.|
|Type of Work:||Working Paper|
|Appears in Collections:||Working Papers - Economics|
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