We analyze a sample of over 3,600 ex ante explicit severance pay agreements in place at 808 firms and show that firms set ex ante explicit severance pay agreements as one component in managing the optimal level of equity incentives. Younger executives are more likely to receive explicit...

Some theoretical literature on firm-specific human capital investment suggests that severance contracts generate strong incentives for CEOs to ensure firm profitability, while the agency problem theory argues severance agreements are a less effective executive compensation measure. Using a...

Using a hand-collected sample of 5,142 CEO severance agreements of S&P 500 companies between 1993 and 2007, I examine whether and how the existence and structure of severance agreements affect shareholder wealth and the risk-taking behavior of CEOs. I show that firms with severance agreements...

The paper examines the motivation and consequences of Golden Parachute (GP) contracts in the context of TBEA, a Chinese company whose GP payment was 1,000 times executive annual salary and which rescinded its GP provision in 2019. We find that for TBEA, whose ownership is dispersed,...

The strategic ambiguity hypothesis posits that when some aspects of performance are observable but not verifiable, the optimal contract is deliberately incomplete. I test this result for the first time. Because a direct test is infeasible, I derive an equivalent result: incompleteness is optimal...