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dc.contributor.authorDesmettre, S.
dc.contributor.authorGould, John
dc.contributor.authorSzimayer, A.
dc.identifier.citationDesmettre, Sascha and Gould, John and Szimayer, Alex. 2010. Own-company stockholding and work effort preferences of an unconstrained executive. Mathematical Methods of Operations Research. 72 (3): pp. 347-378.

We develop a framework for analyzing an executive's own-company stockholding and work effort preferences. The executive, characterized by risk aversion and work effectiveness parameters, invests his personal wealth without constraint in the financial market, including the stock of his own company whose value he can directly influence with work effort. The executive's utility-maximizing personal investment and work effort strategy is derived in closed form, and a utility indifference rationale is applied to determine his required compensation. Being unconstrained byperformance contracting, the executive's work effort strategy establishes a base case for theoretical or empirical assessment of the benefits or otherwise of constraining executives with performance contracting.

dc.publisherSpringer Berlin Heidelberg
dc.subjectOptimal portfolio choice Executive compensation
dc.titleOwn-company stockholding and work effort preferences of an unconstrained executive
dc.typeJournal Article
dcterms.source.titleMathematical Methods of Operations Research

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curtin.departmentSchool of Economics and Finance
curtin.accessStatusOpen access

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