Change search
ReferencesLink to record
Permanent link

Direct link
Optimal Equity Based Incentives: A Norwegian Perspective
Norwegian University of Science and Technology, Faculty of Social Sciences and Technology Management, Department of Industrial Economics and Technology Management.
2012 (English)MasteroppgaveStudent thesis
Abstract [en]

We analyze optimal executive compensation in a principal agent framework using two sample firms from the Norwegian market, design and solve a bi-level principal agent optimization problem. Our analysis reports three important findings. First, our unambiguous results shows that stock options should be a part of the optimal contract in addition to a certain base salary. The options, rather than restricted shares produce the right incentives. Second, indexed options should be granted instead of traditional options in cases where firms have a volatility higher than the market index and where it is a good correlation between those two. Third, our solutions show that exercise price of options should be at or near the stock price at the granting time. We confirm the robustness of our model by optimizing for alternative risk aversion degrees of the CEOs and the disutility factor associated with their effort.

Place, publisher, year, edition, pages
Institutt for industriell økonomi og teknologiledelse , 2012. , 72 p.
URN: urn:nbn:no:ntnu:diva-21076Local ID: ntnudaim:7654OAI: diva2:629200
Available from: 2013-06-16 Created: 2013-06-16 Last updated: 2013-06-22Bibliographically approved

Open Access in DiVA

fulltext(2622 kB)160 downloads
File information
File name FULLTEXT01.pdfFile size 2622 kBChecksum SHA-512
Type fulltextMimetype application/pdf
cover(184 kB)18 downloads
File information
File name COVER01.pdfFile size 184 kBChecksum SHA-512
Type coverMimetype application/pdf

By organisation
Department of Industrial Economics and Technology Management

Search outside of DiVA

GoogleGoogle Scholar
Total: 160 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 30 hits
ReferencesLink to record
Permanent link

Direct link