Template-Type: ReDIF-Paper 1.0
Author-Name:  Giovanni Immordino
Author-Email:  gimmordino@unisa.it
Author-Workplace-Name: Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno
Author-Name:  Anna Maria C. Menichini
Author-Email:  amenichi@unisa.it
Author-Workplace-Name: Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno
Author-Name:  Maria Grazia Romano
Author-Email:  maromano@unisa.it
Author-Workplace-Name: Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno
Title:  Optimal Compensation Contracts for Optimistic Managers
Abstract:  We study an employment contract between an (endogenously) optimistic manager
and realistic investors. The manager faces a trade-off between ensuring that effort reflects accurate news and savoring emotionally beneficial good news. Investors and manager agree on optimal recollection when the weight the manager attaches to anticipatory utility is small. For intermediate values investors bear an extra-cost to make the manager recall bad news. For large weights investors renounce inducing signal recollection. We extend the analysis to the case in which anticipatory utility is the manager’s private information and derive testable predictions on the relationship between personality traits, managerial compensation and recruitment policies
Creation-Date: 2012-11
Publication-Status: Published in Working Papers, november 2012, pages 1-29
File-URL:http://www.dises.unisa.it/RePEc/sep/wpaper/3_224.pdf
File-Format:Application/pdf
File-Function:First version, 2012
Number:3_224
Classification-JEL:D82
Keywords:Over-optimism, managerial compensation, anticipatory utility
Handle:RePEc:sep:wpaper:3_224