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Cited by 610

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Executive Compensation and Principal-Agent Theory

Garen, John E.·1994·Journal of Political Economy
DOI 10.1086/261967
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Abstract

The empirical literature on executive compensation generally fails to specify a model of executive pay on which to base and test hypotheses regarding its determinants. In contrast, this paper analyzes a simple principal-agent model to determine how well it explains variations in CEO incentive pay and salaries. Many findings are consistent with the basic intuition of principal-agent models that compensation is structured to trade off incentives with insurance. However, statistical significance for some of the effects is weak, although the magnitudes are large. Also, there is little evidence of the use of relative performance pay. Nevertheless, while puzzles remain, it seems clear that principal-agent considerations play a role in setting executive compensation.

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Metadata

Authors
Garen, J. E.
Venue
Journal of Political Economy
Publisher
University of Chicago Press
Published
1994-12
Volume
102
Issue
6
Pages
1175-1199
ISSN
  • 0022-3808 (ISSN-L)
  • 1537-534X
DOI
10.1086/261967
OpenAlex
W2048644900
Cited by
610
References
0
FWCI
40.53
Type
journal article
Language
en
Open access
closed

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CoChat. (2026). Citation check: Executive Compensation and Principal-Agent Theory. https://app.cochat.ai/papers/10.1086/261967
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Garen, J. E. (1994). Executive Compensation and Principal-Agent Theory. Journal of Political Economy. https://doi.org/10.1086/261967

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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.