Stock-based compensation and CEO (dis)incentives:
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 wor...
Gespeichert in:
| Hauptverfasser: | , , |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
London
Centre for Economic Policy Research
2007
|
| Schriftenreihe: | Discussion paper / Centre for Economic Policy Research
6515 : Financial economics |
| Schlagworte: | |
| Zusammenfassung: | 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 policies. This problem is especially severe for growth firms, whose stock prices then become over-valued while managers hide the bad news to shareholders. We find that a firm-specific compensation package based on both stock and earnings performance instead induces a combination of high effort, truth revelation and optimal investments. The model produces numerous predictions that are consistent with the empirical evidence. |
| Beschreibung: | 49 S. graph. Darst. |
Internformat
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| 490 | 1 | |a Discussion paper / Centre for Economic Policy Research |v 6515 : Financial economics | |
| 520 | 3 | |a 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 policies. This problem is especially severe for growth firms, whose stock prices then become over-valued while managers hide the bad news to shareholders. We find that a firm-specific compensation package based on both stock and earnings performance instead induces a combination of high effort, truth revelation and optimal investments. The model produces numerous predictions that are consistent with the empirical evidence. | |
| 650 | 4 | |a Chief executive officers |x Salaries, etc | |
| 650 | 4 | |a Corporations |x Finance | |
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| author | Benmelech, Efraim Kandel, Eugene 1959- Veronesi, Pietro 1967- |
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| id | DE-604.BV035375713 |
| illustrated | Illustrated |
| indexdate | 2024-07-09T21:32:26Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-017180035 |
| oclc_num | 191801072 |
| open_access_boolean | |
| owner | DE-355 DE-BY-UBR |
| owner_facet | DE-355 DE-BY-UBR |
| physical | 49 S. graph. Darst. |
| publishDate | 2007 |
| publishDateSearch | 2007 |
| publishDateSort | 2007 |
| publisher | Centre for Economic Policy Research |
| record_format | marc |
| series2 | Discussion paper / Centre for Economic Policy Research |
| spelling | Benmelech, Efraim Verfasser (DE-588)129714151 aut Stock-based compensation and CEO (dis)incentives Effi Benmelech, Eugene Kandel and Pietro Veronesi London Centre for Economic Policy Research 2007 49 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Discussion paper / Centre for Economic Policy Research 6515 : Financial economics 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 policies. This problem is especially severe for growth firms, whose stock prices then become over-valued while managers hide the bad news to shareholders. We find that a firm-specific compensation package based on both stock and earnings performance instead induces a combination of high effort, truth revelation and optimal investments. The model produces numerous predictions that are consistent with the empirical evidence. Chief executive officers Salaries, etc Corporations Finance Employee stock options Stocks Prices Kandel, Eugene 1959- Verfasser (DE-588)129606340 aut Veronesi, Pietro 1967- Verfasser (DE-588)128727594 aut Centre for Economic Policy Research Discussion paper 6515 : Financial economics (DE-604)BV023545932 6515 |
| spellingShingle | Benmelech, Efraim Kandel, Eugene 1959- Veronesi, Pietro 1967- Stock-based compensation and CEO (dis)incentives Chief executive officers Salaries, etc Corporations Finance Employee stock options Stocks Prices |
| title | Stock-based compensation and CEO (dis)incentives |
| title_auth | Stock-based compensation and CEO (dis)incentives |
| title_exact_search | Stock-based compensation and CEO (dis)incentives |
| title_full | Stock-based compensation and CEO (dis)incentives Effi Benmelech, Eugene Kandel and Pietro Veronesi |
| title_fullStr | Stock-based compensation and CEO (dis)incentives Effi Benmelech, Eugene Kandel and Pietro Veronesi |
| title_full_unstemmed | Stock-based compensation and CEO (dis)incentives Effi Benmelech, Eugene Kandel and Pietro Veronesi |
| title_short | Stock-based compensation and CEO (dis)incentives |
| title_sort | stock based compensation and ceo dis incentives |
| topic | Chief executive officers Salaries, etc Corporations Finance Employee stock options Stocks Prices |
| topic_facet | Chief executive officers Salaries, etc Corporations Finance Employee stock options Stocks Prices |
| volume_link | (DE-604)BV023545932 |
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