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Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence
Open accessAbstract
This paper studies optimal incentive contracts when workers have career concerns--concerns about the effects of current performance on future compensation. We show that the optimal compensation contract optimizes total incentives: the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract. Thus the explicit incentives from the optimal compensation contract should be strongest for workers close to retirement because career concerns are weakest for these workers. We find empirical support for this prediction in the relation between chief executive compensation and stock market performance.
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Citations
Cited by
The Provision of Incentives in Firms
Prendergast, C. (1999) · Journal of Economic Literature · doi:10.1257/jel.37.1.7 · Cited by 3,338
Managerial Incentive Problems: A Dynamic Perspective
Holmstrom, B. (1999) · Review of Economic Studies · doi:10.1111/1467-937x.00083 · Cited by 3,172
The use of equity grants to manage optimal equity incentive levels
Core, J., & Guay, W. (1999) · Journal of Accounting and Economics · doi:10.1016/s0165-4101(99)00019-1 · Cited by 1,456
Managerial Conservatism, Project Choice, and Debt
Hirshleifer, D., & Thakor, A. V. (1992) · Review of Financial Studies · doi:10.1093/rfs/5.3.437 · Cited by 555
Frydman, C., & Jenter, D. (2010) · Annual Review of Financial Economics · doi:10.1146/annurev-financial-120209-133958 · Cited by 542
Metadata
- Authors
- Gibbons, R., & Murphy, K. J.
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 1992-06
- Volume
- 100
- Issue
- 3
- Pages
- 468-505
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W2081954355
- Cited by
- 1,873
- References
- 0
- FWCI
- 69.34
- Type
- journal article
- Language
- en
- Open access
- green
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- CoChat. (2026). Citation check: Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence. https://app.cochat.ai/papers/10.1086/261826
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- Gibbons, R., & Murphy, K. J. (1992). Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence. Journal of Political Economy. https://doi.org/10.1086/261826
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
