TY  - UNPD
A1  - Hoffmann, Florian
A1  - Inderst, Roman
A1  - Opp, Marcus M.
T1  - Only time will tell: a theory of deferred compensation
T2  - SAFE working paper series ; No. 218
N2  - This paper provides a complete characterization of optimal contracts in principal-agent settings where the agent's action has persistent effects. We model general information environments via the stochastic process of the likelihood-ratio. The martingale property of this performance metric captures the information benefit of deferral. Costs of deferral may result from both the agent's relative impatience as well as her consumption smoothing needs. If the relatively impatient agent is risk neutral, optimal contracts take a simple form in that they only reward maximal performance for at most two payout dates. If the agent is additionally risk-averse, optimal contracts stipulate rewards for a larger selection of dates and performance states: The performance hurdle to obtain the same level of compensation is increasing over time whereas the pay-performance sensitivity is declining.
T3  - SAFE working paper - 218 
KW  - compensation design
KW  - duration of pay
KW  - moral hazard
KW  - persistence
KW  - principal-agent models
KW  - informativeness principle
Y1  - 2018
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/47201
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-472016
UR  - https://ssrn.com/abstract=3232708
PB  - SAFE
CY  - Frankfurt am Main
ER  -