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Contracting Incentives and Compensation for Property‐Liability Insurer Executives

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  • Elizabeth Grace

Abstract

This article examines several hypotheses about the structure and level of compensation for 103 property‐liability chief executive officers (CEOs) from 1995 through 1997. The greater the level of firm risk and the larger the firm, the greater the use of incentive compensation. Insurers subject to more regulatory attention and those whose CEOs have greater stock ownership make less use of incentive compensation. There is some evidence that option grants and restricted stock awards provide CEOs with differing incentives. This article finds that corporate governance structures, managers' stock ownership, and regulatory attention are not adequate to prevent CEOs from receiving compensation levels in excess of what economic factors predict. Contrary to findings in prior studies, there is little evidence that use of incentive compensation or level of total compensation paid increases with insurer investment opportunities, as traditionally measured.

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  • Elizabeth Grace, 2004. "Contracting Incentives and Compensation for Property‐Liability Insurer Executives," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(2), pages 285-307, June.
    • Handle: RePEc:bla:jrinsu:v:71:y:2004:i:2:p:285-307
    DOI: 10.1111/j.0022-4367.2004.00090.x
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    Cited by:

    1. Imes, Matthew & Anderson, Ronald, 2021. "Executive risk-taking and the agency cost of debt," Journal of Empirical Finance, Elsevier, vol. 64(C), pages 78-94.
    2. Joseph Calandro, 2006. "Accident Year Development, Bonus Banks, and Insurance Incentive Compensation," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 9(2), pages 205-217, September.
    3. Andre P. Liebenberg & David W. Sommer, 2008. "Effects of Corporate Diversification: Evidence From the Property–Liability Insurance Industry," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(4), pages 893-919, December.

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