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Title: Performance-based pay : sharing prosperity and misery.
Authors: Low, Buen Sin.
Keywords: DRNTU::Business
Issue Date: 2006
Abstract: This paper discusses the risk transfer effect and wealth transfer effect of three types of firm-wide cash performance-based pay plans - the incentive pay plan, the pay-at-risk plan, and the pure misery-sharing plan. The valuation models for each type of performance-based pay plan are developed to quantify their wealth transfer effect between shareholders and employees. The models also suggest that there is a risk transfer effect from employees to the shareholders for all three types of performance-based pay. This risk transfer effect is larger for firms that have a higher financial leverage or have a more volatile business environment.
Rights: Nanyang Technological University
Fulltext Permission: restricted
Fulltext Availability: With Fulltext
Appears in Collections:NBS Research Reports (Staff & Graduate Students)

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