Stock-based compensation is the standard solution to agency problems between shareholders and managers. In a dynamic rational expectations equilibrium model with asymmetric information we show that although stock-based compensation causes managers to work harder, it also induces them to hide any worsening of the firm’s investment opportunities by following largely sub-optimal investment The use of stock-based compensation as a solution to agency problems between shareholders and managers has increased dramatically since the early 1990s. We show that in a dynamic rational expectations model with asymmetric information, stock-based compensation not only induces managers to exert costly effort, but also induces them to conceal bad news about future growth options and to choose Stock-Based Compensation and CEO (Dis)Incentives Article (PDF Available) in Quarterly Journal of Economics 125(4):1769-1820 · November 2010 with 181 Reads How we measure 'reads' whenever the CEO has a large stock-based component in his compensation, and the range of possible growth rates is large, there is a pooling Nash equilibriumfor most parameter values. In this equilibrium, the CEO of a maturing firm follows a suboptimal investment policy in order to maintain the pretense that investmentopportunities are still Stock-Based Compensation and CEO (Dis)Incentives Efraim Benmelech, Eugene Kandel, Pietro Veronesi. NBER Working Paper No. 13732 Issued in January 2008 NBER Program(s):Corporate Finance Program, Labor Studies Program Stock-based compensation is the standard solution to agency problems between shareholders and managers. A Guide to CEO Compensation. FACEBOOK TWITTER investors should get a sense of how compensation programs can create incentives— or disincentives—for top managers to work in the interests of whenever the CEO has a large stock-based component in his compensation, and the range of possible growth rates is large, there is a pooling Nash equilibriumfor most parameter values. In this equilibrium, the CEO of a maturing firm follows a suboptimal investment policy in order to maintain the pretense that investmentopportunities are still
Stock-based compensation is the standard solution to agency problems between shareholders and managers. In a dynamic rational expectations equilibrium model with asymmetric information we show that although stock-based compensation causes managers to work harder, it also induces them to hide any worsening of the firm’s investment opportunities by following largely sub-optimal investment The use of stock-based compensation as a solution to agency problems between shareholders and managers has increased dramatically since the early 1990s. We show that in a dynamic rational expectations model with asymmetric information, stock-based compensation not only induces managers to exert costly effort, but also induces them to conceal bad news about future growth options and to choose Stock-Based Compensation and CEO (Dis)Incentives Article (PDF Available) in Quarterly Journal of Economics 125(4):1769-1820 · November 2010 with 181 Reads How we measure 'reads'
The use of stock-based compensation as a solution to agency problems between shareholders and managers has increased dramatically since the early 1990s. We show that in a dynamic rational expectations model with asymmetric information, stock-based compensation not only induces managers to exert costly effort, but also induces them to conceal bad news about future growth options and to choose Stock-Based Compensation and CEO (Dis)Incentives Article (PDF Available) in Quarterly Journal of Economics 125(4):1769-1820 · November 2010 with 181 Reads How we measure 'reads'
21 Feb 2010 disincentives that stock-based compensation create when there is information asymmetry. Section. IV. considers alternative compensation 2 Aug 2019 CEO compensation with this guide to base salaries, bonuses, stock programs can create incentives— or disincentives—for top managers 21 Mar 2013 The trio crunched more than 15 years of data from 1,500 or so companies, expecting to find evidence to support the premise that stock-based pay On average, CEOs receive about 50% of their base pay in the form of bonuses. Yet CEO stock ownership for large public companies (measured as a of this misguided investment—not much of a disincentive for someone who earns on
2003) and thus affect stock price, short-term CEO pay is based heavily on firm accounting the disincentive to engage in CSP present in a short-term focus and T1 - Stock-based compensation and ceo (dis)incentives. AU - Benmelech, Efraim. AU - Kandel, Eugene. AU - Veronesi, Pietro. PY - 2010/11/1. Y1 - 2010/11/1. N2 - The use of stock-based compensation as a solution to agency problems between shareholders and managers has increased dramatically since the early 1990s. whenever the CEO has a large stock-based component in his compensation, and the range of possible growth rates is large, there is a pooling Nash equilibriumfor most parameter values. In this equilibrium, the CEO of a maturing firm follows a suboptimal investment policy in order to maintain the pretense that investmentopportunities are still We show that in a dynamic rational expectations model with asymmetric information, stock-based compensation not only induces managers to exert costly effort, but also induces them to conceal bad news about future growth options and to choose suboptimal investment policies to support the pretense.