Optimal CEO turnover ?

• 成果类型: Article
• 署名作者: Wang, Cheng; Yang, Youzhi
• 署名单位: Fudan University; Shanghai University of Finance & Economics
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2022.105475
• 发表日期: 2022
• 关键词: Optimal contracting; moral hazard; outside option; limited commitment; CEO compensation and turnover

摘要

We study a dynamic principal-agent/firm-CEO relationship that is subject simultaneously to moral hazard, limited commitment, and shocks to the CEO's market value. Termination is used as (a) an incentive instrument to punish the CEO for bad performance, (b) a cost minimization device that uses the CEO's outside value as an external means for compensation, and (c) as a means for replacing the incumbent CEO with a less expensive new CEO. Termination occurs after the CEO receives either a sufficiently high or a sufficiently low outside value. The model generates both voluntary and involuntary/forced turnovers, and counter-offers occur on the equilibrium path. The model is calibrated to the U.S. data to capture the key observed features of CEO pay and turnover. It shows that increased moral hazard offers an explanation for the observed increase in the level and variance of CEO compensation, as well as the increase in forced CEO turnover. (c) 2022 Elsevier Inc. All rights reserved.