This paper investigates whether observed executive compensation contracts are designed to provide risk-taking incentives in addition to effort incentives. We develop a stylized principal-agent model that captures the interdependence between firm risk and managerial incentives. We calibrate the...

We analyze several proposals to restrict CEO compensation and calibrate two models of executive compensation that describe how firms would react to different types of restrictions. We find that many restrictions would have unintended consequences. Restrictions on total realized (ex-post) payouts...

This note is intended for researchers who want to implement the Dittmann and Maug (2007) calibration method. This method allows to test a complete principal-agent model with individual-level data on executive pay. The method consists of two steps. First, the principal-agent model is simplified...