Incentive Compensation When Executives Can Hedge The Market : Evidence of Relative Performance Evaluation The Cross Section  

Oleh:

Garvey, Gerald ; Milbourn, Todd

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 58 no. 4 (2003), page 1557-1582.
Topik: Performance; executive compensation; incentives; securities markets; mathematical models; studies
Fulltext: p 1557.pdf (212.92KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Little evidence exists that firms index executive compensation to remove the influence of marketwide factors. We argue that executives can, in principle, replicate such indexation in their private portfolios. In support, we find that market risk has little effect on the use of stock-based pay for the average executive. but executives' ability to "undo" excessive market risk can be hindered by wealth constraints an in alienability of human capital. We replicate the standard result that there is little relative performance evaluation (RPE) for the average executive, but find strong evidence of RPE for younger executives and executives with less financial wealth.

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