Clawback provisions entitle shareholders to recover previously-awarded incentive compensation from managers involved in accounting manipulation or misconduct. I study theoretically and empirically the impact of clawback provisions on the horizon of executive pay when shareholders face clawback...

Following Oyer (2004) and Rajgopal, Shevlin and Zamora (2006), we provide evidence that the level of stock option compensation results from outside opportunities in the managerial labor market for a sample of 3,214 CEO-year observations from S&P1500 companies between 1996 and 2010. We argue that...

We consider the problem of an employer who has to choose whether to reemploy agents with a positive track record or agents who were unsuccessful. While previously successful managers are likely to be of high ability, they have also accumulated wealth and will be harder to motivate in the future....

Many observers consider the most important responsibility of the board of directors its responsibility to hire and fire the CEO. To this end, an interesting situation arises when a CEO resigns and the board chooses neither an internal nor external candidate, but a current board member as...

This paper shows that there is a natural trade-off when designing market based executive compensation. The benefit of market based pay is that the stock price aggregates speculators’ dispersed information and there-fore takes a picture of managerial performance before the long-term value of a...

The rise in the level of executive compensation in international banking in the last two decades has been striking. At the same time, corporate declarations of relative performance evaluation (RPE) have enjoyed widespread popularity. RPE determines the level of CEO pay by accounting for common...

Our paper evaluates recent regulatory proposals mandating the deferral of bonus payments and claw-back clauses in the financial sector. We study a broadly applicable principal agent setting, in which the agent exerts effort for an immediately observable task (acquisition) and a task for which...

Relative performance evaluation (RPE) is, at least on paper, enjoying widespread popularity in determining the level of executive compensation. Yet existing empirical evidence of RPE is decidedly mixed. Two principal explanations are held responsible for this discord. A constructional challenge...

We examine optimal managerial compensation and turnover policy in a principal-agent model in which the firm output is serially correlated over time. The model captures a learning-by-doing feature: higher effort by the manager increases the quality of the match between the firm and the manager in...

This paper studies how private information in hedging outcomes affects the design of managerial compensation when hedging instruments serve as a double-edged sword in that they may be used for both corporate hedging and earnings management. On the one hand, financial vehicles can offer...