Executive compensation, macroeconomic conditions, and cash flow cyclicality / Stefano Colonnello
Anzeigen / Download1017.7 KB
Discovery
855933755
URN
urn:nbn:de:gbv:3:2-53336
DOI
ISBN
ISSN
Autorin / Autor
Beiträger
Körperschaft
Erschienen
Halle (Saale), Germany : Halle Institute for Economic Research (IWH), March 2016
Umfang
1 Online-Ressource (52 Seiten = 0,99 MB) : Illustrationen
Ausgabevermerk
Sprache
eng
Anmerkungen
Inhaltliche Zusammenfassung
I model the joint effects of debt, macroeconomic conditions, and cash flow cyclicality on risk-shifting behavior and managerial pay-for-performance sensitivity. I show that risk-shifting incentives rise during recessions and that the shareholders can eliminate such adverse incentives by reducing the equity-based compensation in managerial contracts. I also show that this reduction should be larger in highly procyclical firms. Using a sample of U.S. public firms, I provide evidence supportive of the model’s predictions. First, I find that equity-based incentives are reduced during recessions. Second, I show that the magnitude of this effect is increasing in a firm’s cash flow cyclicality.
Schriftenreihe
IWH-Diskussionspapiere ; no. 6/2016 ppn:837399270