Show simple item record

dc.contributor.authorDeVaro, Jed
dc.contributor.authorKurtulus, Fidan Ana
dc.date.accessioned2020-11-17T16:58:08Z
dc.date.available2020-11-17T16:58:08Z
dc.date.issued2007-06-20
dc.identifier.other344001
dc.identifier.urihttps://hdl.handle.net/1813/74710
dc.description.abstract[Excerpt] The notion of a negative relationship between risk and incentives is a central prediction of agency theory. A vast literature has failed to find consistent empirical support for this prediction, with some studies finding a positive relationship, some a negative relationship, and some no relationship at all. Prendergast’s (2002) theory extends the principal-agent model to incorporate the delegation of worker authority, showing that a positive relationship between risk and incentives can arise and potentially explaining the mixed results from empirical tests. In this paper, we empirically test Prendergast’s theory. Using a large, nationally-representative cross section of British establishments that includes information both from employers and from multiple workers in each establishment, we address four empirical questions: 1) Is there evidence of a risk-incentives tradeoff as predicted by the principal-agent model? 2) Is there evidence of a positive relationship between incentive pay and the delegation of worker authority as assumed by Prendergast? 3) Is there evidence of a positive relationship between risk and authority as Prendergast also assumes? 4) Is there empirical support for the main testable implication of Prendergast’s model, namely that the evidence favoring a risk-incentives tradeoff should strengthen when authority controls are added to the model? Our answers are affirmative for all four questions.
dc.language.isoen_US
dc.subjectAgency Theory
dc.subjectRisk versus Incentives Tradeoff
dc.subjectDelegation of Worker Authority
dc.subjectPerformance Pay
dc.titleAn Empirical Analysis of Risk, Incentives, and the Delegation of Worker Authority
dc.typearticle
dc.description.legacydownloadsDeVaro1_An_Empirical_Analysis_of_Risk__Incentives__and_the_Delegation.pdf: 890 downloads, before Oct. 1, 2020.
local.authorAffiliationDeVaro, Jed: jld48@cornell.edu Cornell University
local.authorAffiliationKurtulus, Fidan Ana: fak4@cornell.edu Cornell University


Files in this item

Thumbnail

This item appears in the following Collection(s)

Show simple item record

Statistics