We also find that when firms deviate in their selection of peers from firms of similar size and industry that the peers selected tend to be larger with higher pay.
We examine the use of four different types of hedging instruments that insiders can use to hedge their ownership in the firm.
We use a large database on ESO exercises to document characteristics of exercise behavior and calibrate a utility-based model for measuring how differences in exercise behavior are manifested in option values and incentives.
Our analysis provides guidance to both academics and practitioners about how differences in exercise behavior and model choice affect measures of ESO values and incentives, and underscores the importance of gaining a thorough understanding of the underlying economic forces that affect the behavior of ESO holders Our findings also suggest that the documented asymmetry in the relationship between CEO pay and luck is explained by the firms desire to adjust pay for retention purposes and is not the result of rent-seeking behavior on the part of the CEO.
Date: 2009 References: Add references at Cit Ec Citations View citations in Econ Papers (36) Track citations by RSS feed Downloads: (external link) (application/pdf) Access to full text is restricted to subscribers.
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We are grateful for the helpful comments and suggestions of Lakshmanan Shivakumar (editor), an anonymous referee, Weining Zhang (2013 RAST conference discussant), Srinivasan Krishnamurthy (2013 FMA discussant), Haidan Li, Siqi Li, and seminar participants at Korea University, National University of Singapore, Santa Clara University, Seoul National University, Sogang University, Sung Kyun Kwan University, 2013 Financial Management Association Annual Meeting, and 2013 Review of Accounting Studies conference.We also find that director-specific experience from prior guidance cessations matters for disclosure policy contagion.The positive effect of interlocked directors on the likelihood of quarterly earnings guidance cessation is particularly strong for firms with interlocked directors who experienced positive outcomes from prior guidance cessation decisions.One hypothesis is that A contrasting view is that peer groups are chosen to provide an accurate benchmark for determining the appropriate pay level that is necessary to both retain and motivate the CEO.
We find that the selection of peers depends to a large degree on firms of similar size in the same industry but that there is substantial variation in the chosen peers across firms.John Bizjak, Michael Lemmon and Ryan Whitby () Review of Financial Studies, 2009, vol.