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The economic psychology of incentives: An international study of top managers

Pepper, A and Gore, J (2014) The economic psychology of incentives: An international study of top managers Journal of World Business, 49 (3). pp. 350-361.

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Abstract

The world-wide inflation in executive compensation in recent years has been accompanied by an increase in the prevalence of long-term incentives. This article demonstrates how the subjectively perceived value of long-term incentives is affected by risk aversion, uncertainty aversion, and time preferences. Based on a unique empirical study which involved collecting primary data on executive preferences from around the world, and using a theoretical framework which draws on behavioral agency theory, we conclude that, while long-term incentives are perceived by executives to be effective, they are not in fact an efficient form of reward, and that this outcome is not significantly affected by cross-cultural differences. We conjecture that boards of directors, acting on behalf of shareholders, increase the size of long-term incentive awards in order to compensate executives for the perceived loss of value when compared with less risky, more certain and more immediate forms of reward. © 2013 Elsevier Inc. All rights reserved.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > Surrey Business School
Authors :
AuthorsEmailORCID
Pepper, AUNSPECIFIEDUNSPECIFIED
Gore, JUNSPECIFIEDUNSPECIFIED
Date : 2014
Identification Number : 10.1016/j.jwb.2013.07.002
Additional Information : NOTICE: this is the author’s version of a work that was accepted for publication in <b>Journal of World Business</b>. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in <b>Journal of World Business, 49(3), January 2014. DOI:10.1016/j.jwb.2013.07.002
Depositing User : Symplectic Elements
Date Deposited : 26 Nov 2014 11:00
Last Modified : 28 Mar 2015 14:33
URI: http://epubs.surrey.ac.uk/id/eprint/806625

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