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- Title
The Relationship between Executives' Option-Based Compensation and Risk-Taking in the Property/Liability Insurance Industry: A Simultaneous Equation Approach.
- Authors
Min-Ming Wen; Chen, Carl R.
- Abstract
We study whether insurance companies' option-based compensation induces risk-taking, and whether their firm risk determines the design of CEOs' compensation contracts using a two-equation simultaneous equation system, in which both firm risk and compensation structure are endogenous. Our results show that contracts with a larger options component induce risk-taking. Contrary to prior findings, however, insurer risk does not impact the design of compensation contracts.
- Subjects
INSURANCE; OPTION-adjusted spread analysis; PENSIONS; PROPERTY insurance; LIABILITY insurance; WAGES; INVESTMENT analysis; CONTRACTS; CHIEF executive officers
- Publication
Journal of Insurance Regulation, 2008, Vol 26, Issue 3, p85
- ISSN
0736-248X
- Publication type
Article