Too Much, Too Soon, for Too Long: The Dynamics of Competitive Executive Compensation

• 成果类型: Article
• 署名作者: Chemla, Gilles; Rivera, Alejandro; Shi, Liyan
• 署名单位: Imperial College London; Centre National de la Recherche Scientifique (CNRS); Centre for Economic Policy Research - UK; University of Texas System; University of Texas Dallas; Carnegie Mellon University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13470
• 发表日期: 2025
• 页码: 2921-2970
• 关键词: capital structure; security design; continuous-time; ceo turnover; AGENCY COSTS; externalities; search; MARKET; FIRMS; MODEL

摘要

We examine executive compensation in a general equilibrium model with dynamic moral hazard, where executives' outside options are endogenously determined by equilibrium market compensation. Firms provide incentives through compensation packages featuring deferred payments as carrots and termination as sticks. Crucially, the effectiveness of termination as an incentive device is undermined by the outside options available to executives. As individual firms fail to internalize the effect of their compensation design on these endogenous outside options, the equilibrium is generally inefficient. Compared to shareholder-value-maximizing compensation packages, executives are paid too much, too soon, and keep their jobs for too long.