Does executive compensation reflect corporate productivity? |
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Authors: | Yoon K Choi |
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Institution: | Department of Finance, College of Business Administration, University of Central Florida, Orlando, USA |
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Abstract: | Recent literature has given attention to the effect of CEO-specific productivity on the structure of CEO compensation. Our paper instead focuses on the effect of a different productivity factor—which we call “corporate productivity”—on CEO compensation. In particular, we show that corporate productivity affects the trade-off between incentive and risk in a non-monotonic fashion, which the literature has not yet recognized. Using various empirical proxies for corporate productivity, we show that our results are consistent with the non-monotonic relation and thus contribute to the debates in the incentive-risk trade-off literature. Second, our findings also contribute to the internal capital market literature by exploring the relation between the structure of CEO compensation and excess value. |
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Keywords: | CEO compensation corporate productivity excess value incentive-risk trade-offs G30 G32 J33 |
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