Executive overconfidence and compensation structure

• 成果类型: Article
• 署名作者: Humphery-Jenner, Mark; Lisic, Ling Lei; Nanda, Vikram; Silveri, Sabatino Dino
• 署名单位: University of New South Wales Sydney; George Mason University; Rutgers University System; Rutgers University New Brunswick; University of Texas System; University of Texas Dallas; University of Memphis
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.01.022
• 发表日期: 2016
• 页码: 533-558
• 关键词: Overconfidence; Compensation structure; Incentive compensation

摘要

We examine the impact of overconfidence on compensation structure. Our findings support the exploitation hypothesis: firms offer incentive-heavy compensation contracts to overconfident Chief Executive Officers (CEOs) to exploit their positively biased views of firm prospects. Overconfident CEOs receive more option-intensive compensation and this relation increases with CEO bargaining power. Exogenous shocks (Sarbanes-Oxley Act of 2002 (SOX) and Financial Accounting Standard (FAS) 123R) provide additional support for the findings. Overconfident non-CEO executives also receive more incentive-based pay, independent of CEO overconfidence, buttressing the notion that firms tailor compensation contracts to individual behavioral traits such as overconfidence. (C) 2016 Elsevier B.V. All rights reserved.