Journal ArticleDOI
The Relation between CEO Compensation and Past Performance
Reads0
Chats0
TLDR
This paper developed a simple two-period principal-agent model with moral hazard and adverse selection and test theoretical predictions using CEO compensation data from 1993-2006, finding that salary (bonus) is positively (negatively) associated with past performance for both continuing and newly hired CEOs.Abstract:
This study focuses on the relation between current compensation and past performance measures as signals of a chief executive officer's (CEO's) ability. We develop a simple two-period principal-agent model with moral hazard and adverse selection and test theoretical predictions using CEO compensation data from 1993–2006. Consistent with the predictions, we find that salary (bonus) is positively (negatively) associated with past performance for both continuing and newly hired CEOs. We also find that while current salary is positively associated with future performance, current bonus is not. As the model suggests, salary is adjusted to meet the reservation utility and information rent, and is positively correlated over time to reflect ability. Bonus serves to address moral hazard and adverse selection by separating high-ability agents into riskier contracts. Our results indicate that it is important to disaggregate cash compensation into salary and bonus components to understand the dynamic intera...read more
Citations
More filters
Journal ArticleDOI
Executive compensation and firm performance: evidence from indian firms
TL;DR: In this paper, the authors examined the relationship between executive compensation and firm performance among Indian firms and found that firm performance measured by accounting, as well as market-based measures, significantly affects executive compensation.
Journal ArticleDOI
Are CEOs and CFOs Rewarded for Disclosure Quality
Kai Wai Hui,Steven R. Matsunaga +1 more
TL;DR: In this article, the importance that boards of directors place on effective communication with the investor community by examining whether CEO and CFO compensation are related to the quality of the firm's financial disclosures.
Journal ArticleDOI
The impact of demographic characteristics of CEOs and directors on audit fees and audit delay
TL;DR: In this paper, the authors examined the impact of gender and ethnicity of CEO and audit committee members (directors) on audit fees and audit delay in the US firms and found that firms with female and ethnic minority CEOs pay significantly higher audit fees than those with male Caucasian CEOs.
Journal ArticleDOI
Restrictions on Managers' Outside Employment Opportunities and Asymmetric Disclosure of Bad versus Good News
TL;DR: In this article, the authors examined the effect of restrictions on managers' outside employment opportunities on voluntary corporate disclosure and the recognition of the Inevitable Disclosure Doctrine (IDD) was discussed.
Journal ArticleDOI
Pay Gap and Performance in China
TL;DR: Li et al. as discussed by the authors analyzed the pay gap between executives and employees, focusing on three components: executive pay premium relative to industry peers; employee pay premium; and average pay gap at the industry level.
References
More filters
Journal ArticleDOI
A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
TL;DR: In this article, a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic is presented, which does not depend on a formal model of the structure of the heteroSkewedness.
Journal ArticleDOI
Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis
TL;DR: The CCR ratio form introduced by Charnes, Cooper and Rhodes, as part of their Data Envelopment Analysis approach, comprehends both technical and scale inefficiencies via the optimal value of the ratio form, as obtained directly from the data without requiring a priori specification of weights and/or explicit delineation of assumed functional forms of relations between inputs and outputs as mentioned in this paper.
Journal ArticleDOI
Moral Hazard and Observability
TL;DR: In this article, the role of imperfect information in a principal-agent relationship subject to moral hazard is considered, and a necessary and sufficient condition for imperfect information to improve on contracts based on the payoff alone is derived.
Journal ArticleDOI
Optimal Auction Design
TL;DR: Optimal auctions are derived for a wide class of auction design problems when the seller has imperfect information about how much the buyers might be willing to pay for the object.
Journal ArticleDOI
Corporate governance, chief executive officer compensation, and firm performance
TL;DR: This article found that measures of board and ownership structure explain a significant amount of cross-sectional variation in CEO compensation, after controlling for standard economic determinants of pay, and that CEOs earn greater compensation when governance structures are less effective.