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Article: Stock trading, information production, and executive incentives

TitleStock trading, information production, and executive incentives
Authors
KeywordsAnalysts' Earnings Forecasts
Market Microstructure
Pay-Performance Sensitivity
Probability Of Informed Trading (Pin)
Issue Date2008
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jcorpfin
Citation
Journal Of Corporate Finance, 2008, v. 14 n. 4, p. 484-498 How to Cite?
AbstractThis paper investigates the effect of stock market microstructure on managerial compensation schemes. We propose and empirically demonstrate that the sensitivity of chief executive officer's (CEO's) compensations to changes in stockholders' value is higher when the stock market facilitates the production and aggregation of private or public information. Using stock trading data and analysts' earnings forecast data, we construct five different measures of the information content in stock prices. These measures, separately and jointly, account for the cross-sectional variations in CEO pay-performance sensitivity well. Our results are robust to the choice of samples, incentive measures, model specifications, and estimation methods. We extend the analysis to non-CEO executives and executive teams and find similar results. © 2008 Elsevier B.V. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/177760
ISSN
2015 Impact Factor: 1.286
2015 SCImago Journal Rankings: 1.446
SSRN
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorKang, Qen_US
dc.contributor.authorLiu, Qen_US
dc.date.accessioned2012-12-19T09:39:49Z-
dc.date.available2012-12-19T09:39:49Z-
dc.date.issued2008en_US
dc.identifier.citationJournal Of Corporate Finance, 2008, v. 14 n. 4, p. 484-498en_US
dc.identifier.issn0929-1199en_US
dc.identifier.urihttp://hdl.handle.net/10722/177760-
dc.description.abstractThis paper investigates the effect of stock market microstructure on managerial compensation schemes. We propose and empirically demonstrate that the sensitivity of chief executive officer's (CEO's) compensations to changes in stockholders' value is higher when the stock market facilitates the production and aggregation of private or public information. Using stock trading data and analysts' earnings forecast data, we construct five different measures of the information content in stock prices. These measures, separately and jointly, account for the cross-sectional variations in CEO pay-performance sensitivity well. Our results are robust to the choice of samples, incentive measures, model specifications, and estimation methods. We extend the analysis to non-CEO executives and executive teams and find similar results. © 2008 Elsevier B.V. All rights reserved.en_US
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jcorpfinen_US
dc.relation.ispartofJournal of Corporate Financeen_US
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectAnalysts' Earnings Forecastsen_US
dc.subjectMarket Microstructureen_US
dc.subjectPay-Performance Sensitivityen_US
dc.subjectProbability Of Informed Trading (Pin)en_US
dc.titleStock trading, information production, and executive incentivesen_US
dc.typeArticleen_US
dc.identifier.emailLiu, Q: qliu@hku.hken_US
dc.identifier.authorityLiu, Q=rp01078en_US
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.jcorpfin.2008.06.003en_US
dc.identifier.scopuseid_2-s2.0-50049123571en_US
dc.identifier.hkuros147684-
dc.identifier.hkuros177113-
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-50049123571&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume14en_US
dc.identifier.issue4en_US
dc.identifier.spage484en_US
dc.identifier.epage498en_US
dc.identifier.isiWOS:000259831600013-
dc.publisher.placeNetherlandsen_US
dc.identifier.ssrn687109-
dc.identifier.scopusauthoridKang, Q=24484765900en_US
dc.identifier.scopusauthoridLiu, Q=55429572300en_US
dc.identifier.citeulike5340250-

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