Jervis. According to (2003), operators who are moderately confident and overly optimistic may be a good thing for the company, because they need fewer choices to make decisions consistent with shareholders' preferences. However, for shareholders, managers who are overconfident and optimistic about compensation have two great shortcomings. First of all, shareholders' wealth is reduced due to excessive remuneration of operators. Secondly, driven by excessive convexity of the contract, managers make the company face the risk of not meeting the best interests of shareholders.
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