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Executive Compensation: Six Questions That Need Answering

  • John M. Abowd
  • David S. Kaplan

This article address six questions concerning executive compensation, drawing on recent advances in the study of executive compensation, including the role of stock and option holdings: How much does executive compensation cost the firm? How much is executive compensation worth to the recipient? How well does executive compensation work? What are the effects of executive compensation? How much executive compensation is enough? Could executive compensation be improved? Our discussion will focus on the role of agency theory, which predicts that stock-based compensation will align executive and shareholder interests by linking the executive's compensation directly to increases in the market value of the company.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.13.4.145
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 13 (1999)
Issue (Month): 4 (Fall)
Pages: 145-168

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Handle: RePEc:aea:jecper:v:13:y:1999:i:4:p:145-168
Note: DOI: 10.1257/jep.13.4.145
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  9. Brian J. Hall & Jeffrey B. Liebman, 1997. "Are CEOs Really Paid Like Bureaucrats?," NBER Working Papers 6213, National Bureau of Economic Research, Inc.
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  18. Tehranian, Hassan & Waegelein, James F., 1985. "Market reaction to short-term executive compensation plan adoption," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 131-144, April.
  19. Cuny, Charles J. & Jorion, Philippe, 1995. "Valuing executive stock options with endogenous departure," Journal of Accounting and Economics, Elsevier, vol. 20(2), pages 193-205, September.
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