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In this study we extend agency based research by examining the role of risk in the structure of managerial compensation and its relationship to organization performance. Our results suggest that organizations facing higher risk do not place greater emphasis on short term incentives, they place less emphasis on it. Also, higher risk firms which rely on incentive pay exhibited poorer performance than high risk firms which de-emphasize incentive pay.


Suggested Citation
Bloom, M. C. & Milkovich, G. T. (1997). The relationship between risk, incentive pay, and organizational performance (CAHRS Working Paper #97-23). Ithaca, NY: Cornell University, School of Industrial and Labor Relations, Center for Advanced Human Resource Studies.