How to properly compensate and incentivize players is an important question in the realm of professional sports, and more broadly, is a central question in contract design. With the increasing use of performance-based compensation packages and tax law favoring such compensation design, a natural...

This study examines compensation disclosure and corporate governance in the Chinese stock market. China's unfolding governance reform and the adoption of Western-style disclosure present a quasi-experimental setting to examine the effect of governance mechanisms on disclosure level. We code...

We develop a cost-benefit tradeoff model to explain corporate boards' decision whether to use compensation peer benchmarking. Peer benchmarking helps a board retain a talented but risk-averse CEO, but it weakens CEO incentives to exert effort. Consistent with high retention needs, benchmarking...

We measure U.S. publicly traded companies' exposures to skilled labor risk, i.e., the potential failure in attracting and retaining skilled labor, by the intensity of their discussions on this issue in their 10-K filings. We show that this measure effectively captures firm risk due to the...

Employees in financial firms are compensated for creating value for the firm, but firms themselves also serve a public interest. This tension can lead to issues that could impose a significant risk to the firm and the public. The authors describe three channels through which deferred cash...

We examine the optimal design of managerial compensation in a setting in which a manager must be induced to maximize shareholder value while managing the firm's cash flow risks. Our model shows that, while high-powered incentive pay (e.g., options) induces the manager to increase shareholder...

We develop a model where a firm has an optimal exposure to cyber risk. With rational, fully informed agents and with no hysteresis, a successful cyberattack should have no impact on a financially unconstrained target's reputation and post-attack policies. In contrast, when a successful attack...

Financial incentives are important tools for aligning the interests of executives and shareholders, particularly in markets with dispersed share ownership where investors struggle to actively monitor management. Today, however, there is widespread investor dissatisfaction with executive...