File Download

There are no files associated with this item.

  Links for fulltext
     (May Require Subscription)
Supplementary

Article: Earnings vs. stock-price based incentives in managerial compensation contracts

TitleEarnings vs. stock-price based incentives in managerial compensation contracts
Authors
KeywordsMispricing
Investment policy
Compensation
Issue Date2016
Citation
Review of Accounting Studies, 2016, v. 21, n. 1, p. 316-348 How to Cite?
Abstract© 2015, Springer Science+Business Media New York.We develop a theory of stock-price-based incentives even when the stock price does not contain information unknown to the firm. In our model, a manager must search for and decide on new investment projects when the market may have a difference of opinion about the quality of the firm’s investment opportunities. The firm optimally provides incentives based solely on realized earnings, leading to an efficient investment policy, when the market has congruent or pessimistic beliefs; however, the firm optimally introduces stock-price-based incentives, leading to an inefficient investment policy, when the market has optimistic beliefs. If the firm can raise equity capital on favorable terms, negative NPV projects from the perspective of the firm may be positive NPV projects from the perspective of current shareholders. The firm motivates the manager to take such projects by basing some compensation on the current stock price.
Persistent Identifierhttp://hdl.handle.net/10722/241905
ISSN
2017 Impact Factor: 1.588
2015 SCImago Journal Rankings: 2.039
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorBernardo, Antonio E.-
dc.contributor.authorCai, Hongbin-
dc.contributor.authorLuo, Jiang-
dc.date.accessioned2017-06-23T01:56:04Z-
dc.date.available2017-06-23T01:56:04Z-
dc.date.issued2016-
dc.identifier.citationReview of Accounting Studies, 2016, v. 21, n. 1, p. 316-348-
dc.identifier.issn1380-6653-
dc.identifier.urihttp://hdl.handle.net/10722/241905-
dc.description.abstract© 2015, Springer Science+Business Media New York.We develop a theory of stock-price-based incentives even when the stock price does not contain information unknown to the firm. In our model, a manager must search for and decide on new investment projects when the market may have a difference of opinion about the quality of the firm’s investment opportunities. The firm optimally provides incentives based solely on realized earnings, leading to an efficient investment policy, when the market has congruent or pessimistic beliefs; however, the firm optimally introduces stock-price-based incentives, leading to an inefficient investment policy, when the market has optimistic beliefs. If the firm can raise equity capital on favorable terms, negative NPV projects from the perspective of the firm may be positive NPV projects from the perspective of current shareholders. The firm motivates the manager to take such projects by basing some compensation on the current stock price.-
dc.languageeng-
dc.relation.ispartofReview of Accounting Studies-
dc.subjectMispricing-
dc.subjectInvestment policy-
dc.subjectCompensation-
dc.titleEarnings vs. stock-price based incentives in managerial compensation contracts-
dc.typeArticle-
dc.description.natureLink_to_subscribed_fulltext-
dc.identifier.doi10.1007/s11142-015-9339-6-
dc.identifier.scopuseid_2-s2.0-84958772122-
dc.identifier.volume21-
dc.identifier.issue1-
dc.identifier.spage316-
dc.identifier.epage348-
dc.identifier.isiWOS:000370797100009-

Export via OAI-PMH Interface in XML Formats


OR


Export to Other Non-XML Formats