Executive Overconfidence and Compensation Structure
Copyright policy )Executive Overconfidence and Compensation Structure
We examine the impact of overconfidence on compensation structure. Our findings support the exploitation hypothesis: firms offer incentive-heavy compensation contracts to overconfident Chief Executive Officers (CEOs) to exploit their positively biased views of firm prospects. Overconfident CEOs receive more option-intensive compensation and this relation increases with CEO bargaining power. Exogenous shocks (Sarbanes-Oxley Act of 2002 (SOX) and Financial Accounting Standard (FAS) 123R) provide additional support for the findings. Overconfident non-CEO executives also receive more incentive-based pay, independent of CEO overconfidence, buttressing the notion that firms tailor compensation contracts to individual behavioral traits such as overconfidence.
- University of Memphis United States
- UNSW Sydney Australia
- Rutgers, The State University of New Jersey United States
- The University of Texas at Dallas United States
- Virginia Tech United States
3501 Accounting, Auditing and Accountability, 3507 Strategy, Management and Organisational Behaviour, 330, anzsrc-for: 35 Commerce, 3502 Banking, 35 Commerce, anzsrc-for: 3507 Strategy, anzsrc-for: 3502 Banking, Management, anzsrc-for: 3801 Applied economics, anzsrc-for: 1502 Banking, anzsrc-for: 3501 Accounting, Finance and Investment, Tourism and Services, anzsrc-for: 1402 Applied Economics, anzsrc-for: 1606 Political Science
3501 Accounting, Auditing and Accountability, 3507 Strategy, Management and Organisational Behaviour, 330, anzsrc-for: 35 Commerce, 3502 Banking, 35 Commerce, anzsrc-for: 3507 Strategy, anzsrc-for: 3502 Banking, Management, anzsrc-for: 3801 Applied economics, anzsrc-for: 1502 Banking, anzsrc-for: 3501 Accounting, Finance and Investment, Tourism and Services, anzsrc-for: 1402 Applied Economics, anzsrc-for: 1606 Political Science
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