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Pay for Short-Term Performance: Executive Compensation in Speculative Markets

Author

Listed:
  • Patrick Bolton
  • Jose Scheinkman
  • Wei Xiong

Abstract

We argue that the root cause behind the recent corporate scandals associated with CEO pay is the technology bubble of the latter half of the 1990s. Far from rejecting the optimal incentive contracting theory of executive compensation, the recent evidence on executive pay can be reconciled with classical agency theory once one expands the framework to allow for speculative stock markets.

Suggested Citation

  • Patrick Bolton & Jose Scheinkman & Wei Xiong, 2006. "Pay for Short-Term Performance: Executive Compensation in Speculative Markets," NBER Working Papers 12107, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12107
    Note: AP CF
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    File URL: http://www.nber.org/papers/w12107.pdf
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    Cited by:

    1. Peng, Lin & Röell, Ailsa A, 2009. "Managerial Incentives and Stock Price Manipulation," CEPR Discussion Papers 7442, C.E.P.R. Discussion Papers.
    2. Won-Yong Oh & Young Kyun Chang & Zheng Cheng, 2016. "When CEO Career Horizon Problems Matter for Corporate Social Responsibility: The Moderating Roles of Industry-Level Discretion and Blockholder Ownership," Journal of Business Ethics, Springer, vol. 133(2), pages 279-291, January.

    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance

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