Incentive compensation for risk managers when effort is unobservable

In a financial intermediary, risk managers can expend effort to reduce loan probability of default and loss given default, but effort is unobservable. Incentive compensation (IC) can induce manager effort. When deposit insurance is subsidized, the demand for risk management declines. Regulatory policy should then reinforce incentives to offer risk mangers appropriate IC contracts.

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Year of publication:	2013-10
Authors:	Kupiec, Paul H.
Institutions:	American Enterprise Institute
Keywords:	AEI Economic Policy Working Paper Series

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Series:	Working Papers.
Type of publication:	Book / Working Paper
Classification:	A - General Economics and Teaching ; G - Financial Economics
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010842036