In this paper we revisit the question of relative performance evaluation (RPE) in executive compensation. While previous literature has commonly rejected the use of RPE when using equity returns as performance measure, we argue that the total return of the firm is a preferable metric in RPE...

We develop a measurement-error framework for assessing the quality of relative-performance metrics designed to filter out the systematic component of performance, and analyze relative total shareholder return (rTSR)-the predominant metric market participants use to isolate managers'...

The state of the art in the analyst forecasting literature is that analyst earnings forecast ability is only firm-specific (Chen, Francis, and Jiang (2005); Chen and Jiang (2006)). This view is based on Park and Stice's (2000) finding of the absence of a “spillover” effect, i.e., investors...

Does a company's stock mispricing influence its decision to issue an earnings forecast? Does executive compensation affect the nature of the forecast? How does the market react to these forecasts? I address these questions using cross-sectional and time-series variation in stock mispricing...

This paper studies the first day return of 227 carve-outs during 1996-2013. I find that the first day return of newly issued subsidiary stocks is explained by the reporting distortions in the pre IPO period, conditioned on whether the executives and directors of the subsidiary received stock...

This paper contributes to the literature that analyses the relationship between Share-Option Based Compensation (SOBC) expense and shareholder returns. It utilises a sample of financial firms listed in the European Economic Area and Switzerland between 2005 and 2016 to make inferences about the...

We document negative stock returns and elevated trading volumes around executives' early option exercise disclosures post-SOX but not pre-SOX. This stock price reaction is incomplete, and the negative stock price drift is smaller post-SOX compared to pre-SOX. We also show effects of media...

Traditional finance theory suggests that riskier investments should yield higher returns. Challenging this notion, anecdotal and empirical evidence suggests that highly-incented managers may take on excessive risk, leading to greater losses, while other theoretical research argues that high...

It has been well-established that both stock prices and accounting earnings are used to evaluate and compensate CEOs. Prior studies often interpret the higher sensitivity of compensation revisions to stock prices (relative to accounting earnings) as the superior role of price formation versus...

We document that CEO cash compensation is twice as sensitive to negative stock returns as it is to positive stock returns. Since stock returns include both unrealized gains and unrealized losses, we expect cash compensation to be less sensitive to stock returns when returns contain unrealized...