publication . Preprint . Article . 2009

Managerial Incentives and Stock Price Manipulation

Lin Peng; Ailsa A. Röell;
Open Access
  • Published: 01 Sep 2009
This paper presents a rational expectations model of optimal executive compensation in a setting where managers are in a position to manipulate short-term stock prices, and managers' propensity to manipulate is uncertain. Stock-based incentives elicit not only productive effort, but also costly information manipulation. We analyze the tradeoffs involved in conditioning pay on long- versus short-term performance and characterize a second-best optimal compensation scheme. The paper shows manipulation, and investors' uncertainty about it, affects the equilibrium pay contract and the informational efficiency of asset prices. The paper derives a range of new cross-se...
free text keywords: corporate governance; Executive compensation; long- versus short-term; manipulation uncertainty, jel:D8, jel:G30, jel:G34, jel:J33, jel:J41, jel:K2, Stock price, Finance, business.industry, business, Incentive, Comparative statics, Economics, Rational expectations, Corporate governance, Executive compensation, Microeconomics, Financial economics
Related Organizations
Powered by OpenAIRE Research Graph
Any information missing or wrong?Report an Issue