Growth Options, Incentives, and Pay for Performance: Theory and Evidence

• 成果类型: Article
• 署名作者: Gryglewicz, Sebastian; Hartman-Glaser, Barney; Zheng, Geoffery
• 署名单位: Erasmus University Rotterdam - Excl Erasmus MC; Erasmus University Rotterdam; University of California System; University of California Los Angeles
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2018.3267
• 发表日期: 2020
• 页码: 1248-1277
• 关键词: Dynamic contracting; Real options; PAY-PERFORMANCE SENSITIVITY

摘要

Pay-performance sensitivity is a common proxy for the strength of incentives. We show that growth options create a wedge between expected-pay-effort sensitivity, which determines actual incentives, and pay-performance sensitivity, which is the ratio of expected-pay-effort to performance-effort sensitivity. An increase in growth option intensity can increase performance-effort sensitivity more than expected-pay-effort sensitivity so that, as incentives increase, pay-performance sensitivity decreases. We document empirical evidence consistent with this finding. Pay-performance sensitivity, measured by dollar changes in manager wealth over dollar changes in firm value, decreases with proxies for growth option intensity and increases with proxies for growth option exercise.