Inducement grants, hiring announcements, and adverse selection for new CEOs

• 成果类型: Article
• 署名作者: Cadman, Brian; Carrizosa, Richard; Peng, Xiaoxia
• 署名单位: Utah System of Higher Education; University of Utah; University of Texas System; University of Texas El Paso
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-019-09517-9
• 发表日期: 2020
• 页码: 279-312
• 关键词: stock option awards; performance; pay; INFORMATION; turnover; MARKET; COMPENSATION; succession; DIRECTORS; RISK

摘要

We examine how adverse selection problems when hiring new external CEOs affect contractual features of inducement grants. Focusing on the sensitivity of inducement grants to the new CEO announcement return ($Sensitivity), we find that firms provide inducement grants that are more sensitive to the new CEO announcement return when information asymmetry about the new CEO is more severe and the costs of adverse selection problems are higher. We also find a positive relation between the market reaction to the appointment and $Sensitivity. We consider factors that reduce information asymmetry (e.g., engaging a search firm or appointing internal CEOs) and find they are associated with lower sensitivity of the inducement grant to the announcement.