Non-Performance Pay and Relational Contracting: Evidence from CEO Compensation
Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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Non-Performance Pay and Relational Contracting: Evidence from CEO Compensation. / DeVaro, Jed; Kim, Jin-Hyuk; Vikander, Nick.
I: Economic Journal, Bind 128, Nr. 613, 2018, s. 1923-1951.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Non-Performance Pay and Relational Contracting: Evidence from CEO Compensation
AU - DeVaro, Jed
AU - Kim, Jin-Hyuk
AU - Vikander, Nick
PY - 2018
Y1 - 2018
N2 - CEOs are routinely compensated for aspects of firm performance that are beyond their control. This is puzzling from an agency perspective, which assumes performance pay should be efficient. Working within an agency framework, we provide a rational for this seemingly inefficient feature of CEO compensation by invoking the idea of informal agreements, specifically the theory of relational contracting. We derive observable implications to distinguish relational from formal contracting and, using ExecuComp data, find that CEOs' annual cash and equity incentive payments positively correlate with the cyclical component of sales and respond to measures of persistence as relational contracting theory predicts.
AB - CEOs are routinely compensated for aspects of firm performance that are beyond their control. This is puzzling from an agency perspective, which assumes performance pay should be efficient. Working within an agency framework, we provide a rational for this seemingly inefficient feature of CEO compensation by invoking the idea of informal agreements, specifically the theory of relational contracting. We derive observable implications to distinguish relational from formal contracting and, using ExecuComp data, find that CEOs' annual cash and equity incentive payments positively correlate with the cyclical component of sales and respond to measures of persistence as relational contracting theory predicts.
KW - Faculty of Social Sciences
KW - relational contracts
KW - CEO compensation
KW - pay‐for‐luck
KW - skimming view
U2 - 10.1111/ecoj.12471
DO - 10.1111/ecoj.12471
M3 - Journal article
VL - 128
SP - 1923
EP - 1951
JO - The Economic Journal
JF - The Economic Journal
SN - 0013-0133
IS - 613
ER -
ID: 222750625