The Role of Stock Price Informativeness in Compensation Complexity
Benjamin Bennett,
Gerald Garvey,
Todd Milbourn and
Zexi Wang
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Benjamin Bennett: Ohio State University (OSU) - Department of Finance
Gerald Garvey: Blackrock
Todd Milbourn: Washington University in Saint Louis - Olin Business School
Zexi Wang: University of Bern
Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics
Abstract:
We study the effect of stock price informativeness (SPI) on executive compensation complexity. Using textual analysis of SEC proxy statements to construct compensation complexity measures for US public firms, we find strong evidence that higher SPI reduces pay complexity. We then use mutual fund redemption as an exogenous decrease in SPI to address endogeneity concerns. When fund flow pressure is high, pay includes more performance metrics, a greater number of vesting periods, and options with longer vesting periods. When stock prices convey information more effectively, executive pay is simpler.
JEL-codes: G30 J33 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-hrm and nep-lma
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Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2019-7
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