In this study, we take a comprehensive look at asymmetry in pay for luck, which is the finding that CEOs are rewarded for good luck, but are not penalized to the same extent for bad luck. Our main takeaway –– based on over 200 different specifications –– is that there is no asymmetry in...

We find that firms are more likely to manage earnings upward when their earnings would otherwise fall short of expected dividend levels. This earnings management behavior appears to significantly impact the likelihood of a dividend cut. Firms whose discretionary accruals cause reported earnings...

We examine how incentives embedded in managerial compensation contracts are priced by the bond and stock markets. Specifically, the incentives we consider are the sensitivity of CEO wealth to stock price (delta) and the sensitivity of CEO wealth to stock-return volatility (vega). Controlling for...

We provide evidence that firms reprice out-of-the-money executive stock options in order to realign managerial incentives. A sharp decline in stock price, by reducing the sensitivity of executive pay to firm performance (delta) and, in many cases, increasing sensitivity of executive pay to...

This paper provides empirical evidence of a strong relation between the structure of managerial compensation and both investment policy and debt policy. Higher sensitivity of CEO wealth to stock volatility (vega) is associated with riskier policy choices, including relatively more investment in...

In response to recent requests from academics and practitioners, this note addresses the data and program we use in our published articles on executive compensation and incentives. First, we detail our methodology for the calculation of delta (pay-performance sensitivity), vega (risk-taking...

Dividend paying firms tend to manage earnings upward when their earnings would otherwise fall short of expected dividend levels. This behavior is evident only in firms with positive debt and is more aggressive prior to the Sarbanes-Oxley Act, subsequent to the 2003 dividend tax cut, in high...

This paper re-examines the relation between firm value and board structure. We find that complex firms, which have greater advising requirements than simple firms, have larger boards with more outside directors. The relation between Tobin's Q and board size is U-shaped which, at face value,...

This paper provides empirical evidence of a strong causal relation between the structure of managerial compensation and investment policy, debt policy, and firm risk. Controlling for CEO pay-performance sensitivity (delta) and the feedback effects of firm policy and risk on the structure of the...