CEO Replacement Under Private Information

• 成果类型: Article
• 署名作者: Inderst, Roman; Mueller, Holger M.
• 署名单位: New York University; Goethe University Frankfurt; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhq018
• 发表日期: 2010
• 页码: 2935
• 关键词: investment opportunity set; executive-compensation; golden parachutes; firm performance; turnover; COMPETITION; incentives; OWNERSHIP; DIRECTORS; dividend

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)