Investor Horizon and CEO Horizon Incentives

• 成果类型: Article
• 署名作者: Cadman, Brian; Sunder, Jayanthi
• 署名单位: Utah System of Higher Education; University of Utah; University of Arizona
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50719
• 发表日期: 2014
• 页码: 1299-1328
• 关键词: initial public offerings; institutional investors; executive-compensation; Venture capitalists; empirical-evidence; IPO; performance; BEHAVIOR; MARKETS; FIRMS

摘要

We examine the relation between shareholder investment horizon and chief executive officer (CEO) horizon incentives derived from compensation contracts. We find that influential incumbent shareholders provide managers with short-horizon incentives to maximize current firm value when these shareholders plan to sell their stock. Specifically, we use the initial public offering (IPO) setting in which venture capitalists (VCs) represent short-horizon, controlling investors with strong selling incentives after the IPO. We predict and find that VCs' short-term incentives influence CEO's annual horizon incentives following the IPO. At the same time, institutional monitoring limits the influence of VCs on annual, short-horizon incentives. To preempt this disciplining by market participants, VCs grant equity prior to the IPO that correspond with their short-horizons and result in shorter portfolio horizon incentives for the CEO after the IPO. We also document a positive relation between long-run abnormal stock returns and horizon incentives, consistent with horizon incentives influencing management actions.