CEO Replacement Under Private Information

被引:54
作者
Inderst, Roman [2 ]
Mueller, Holger M. [1 ,3 ]
机构
[1] NYU, Stern Sch Business, New York, NY 10012 USA
[2] Goethe Univ Frankfurt, D-6000 Frankfurt, Germany
[3] NBER, Cambridge, MA 02138 USA
关键词
INVESTMENT OPPORTUNITY SET; EXECUTIVE-COMPENSATION; GOLDEN PARACHUTES; FIRM PERFORMANCE; TURNOVER; COMPETITION; INCENTIVES; OWNERSHIP; DIRECTORS; DIVIDEND;
D O I
10.1093/rfs/hhq018
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
This article examines the optimal CEO compensation and replacement policy when the CEO is privately informed about the firm's continuation value under his leadership. Ex ante moral hazard implies that the CEO must receive ex post quasi rents, which endogenously biases him toward continuation. Our model shows that to induce "bad" CEOs to quit, it may be best to make continuation costly (through steep incentive pay) rather than simply rewarding quitting (through severance pay). Incentive pay makes continuation attractive for "good" CEOs, who can expect high future on-the-job pay, but unattractive for "bad" CEOs, who may instead prefer to take their outside option payoff. Our model generates novel empirical implications that jointly relate CEO compensation and turnover to corporate governance, firm size, cash-flow risk, and the informativeness of performance measurement. (JEL G34)
引用
收藏
页码:2935 / 2969
页数:35
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