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Talking down the firm: Short-term market manipulation and optimal management compensation

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  • Garvey, Gerald T.
  • Grant, Simon
  • King, Stephen P.

Abstract

This paper analyzes the optimal use of short and long-term share prices in management incentive contracts. A key innovation of our model is that the short-term share price is determined even before the manager has made her effort choice and therefore cannot be informative in the standard principl-agent sense.
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Suggested Citation

  • Garvey, Gerald T. & Grant, Simon & King, Stephen P., 1998. "Talking down the firm: Short-term market manipulation and optimal management compensation," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 555-570, September.
    • Handle: RePEc:eee:indorg:v:16:y:1998:i:5:p:555-570
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    1. Lambert, Richard A., 1993. "The use of accounting and security price measures of performance in managerial compensation contracts: A discussion," Journal of Accounting and Economics, Elsevier, vol. 16(1-3), pages 101-123, April.
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    2. Firth, M. & Tam, M. & Tang, M., 1999. "The determinants of top management pay," Omega, Elsevier, vol. 27(6), pages 617-635, December.
    3. Calcagno, R., 2000. "Is Leverage Effective in Increasing Performance Under Managerial Moral Hazard?," Discussion Paper 2000-101, Tilburg University, Center for Economic Research.

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    More about this item

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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