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Conference Paper: CEO contractual protection and managerial short-termism

TitleCEO contractual protection and managerial short-termism
Authors
KeywordsEmployment agreement
Severance pay agreement
Managerial short-termism
Issue Date2012
PublisherSocial Science Electronic Publishing, Inc.. The Journal's web site is located at http://www.ssrn.com/
Citation
The 5th Annual Research Conference of Chinese Accounting Professors' Association of North America (CAPANA 2012), Xi'an, China, 4-6 July 2012. In Social Science Research Network (SSRN), 2012, abstract no. 2142230 How to Cite?
AbstractHow to address managerial short-termism has been an important issue for companies, regulators, and researchers. In this paper we examine the impact of CEO contractual protection, in the form of employment agreement and severance pay agreement, on managerial short-termism. We find that firms with CEO contractual protection are less likely to cut R&D expenditures to avoid earnings decreases. The effect is both statistically and economically significant. We further find that the effect of CEO contractual protection is stronger in cases where CEOs have stronger incentives to engage in myopic behavior, either due to job security concerns or due to short investment horizon of investors, and in cases where alternative monitoring mechanisms are weaker.
Persistent Identifierhttp://hdl.handle.net/10722/165798
SSRN

 

DC FieldValueLanguage
dc.contributor.authorChen, Xen_US
dc.contributor.authorCheng, Qen_US
dc.contributor.authorLo, AKen_US
dc.contributor.authorWang, Xen_US
dc.date.accessioned2012-09-20T08:24:00Z-
dc.date.available2012-09-20T08:24:00Z-
dc.date.issued2012en_US
dc.identifier.citationThe 5th Annual Research Conference of Chinese Accounting Professors' Association of North America (CAPANA 2012), Xi'an, China, 4-6 July 2012. In Social Science Research Network (SSRN), 2012, abstract no. 2142230en_US
dc.identifier.urihttp://hdl.handle.net/10722/165798-
dc.description.abstractHow to address managerial short-termism has been an important issue for companies, regulators, and researchers. In this paper we examine the impact of CEO contractual protection, in the form of employment agreement and severance pay agreement, on managerial short-termism. We find that firms with CEO contractual protection are less likely to cut R&D expenditures to avoid earnings decreases. The effect is both statistically and economically significant. We further find that the effect of CEO contractual protection is stronger in cases where CEOs have stronger incentives to engage in myopic behavior, either due to job security concerns or due to short investment horizon of investors, and in cases where alternative monitoring mechanisms are weaker.-
dc.languageengen_US
dc.publisherSocial Science Electronic Publishing, Inc.. The Journal's web site is located at http://www.ssrn.com/-
dc.relation.ispartofSocial Science Research Network (SSRN)en_US
dc.rights© 2011 Social Science Electronic Publishing, Inc. All Rights Reserved. For personal & noncommercial use apply only to specific documents and use of specific SSRN-provided statistics and other information.-
dc.subjectEmployment agreement-
dc.subjectSeverance pay agreement-
dc.subjectManagerial short-termism-
dc.titleCEO contractual protection and managerial short-termismen_US
dc.typeConference_Paperen_US
dc.identifier.emailWang, X: wangxacy@hku.hken_US
dc.identifier.authorityWang, X=rp01555en_US
dc.description.naturelink_to_OA_fulltext-
dc.identifier.doi10.2139/ssrn.2142230-
dc.identifier.hkuros206778en_US
dc.publisher.placeUnited States-
dc.identifier.ssrn2142230-

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