CEO investment of deferred compensation plans and firm performance

Domenico Rocco Cambrea, Stefano Colonnello, Giuliano Curatola and Giulia Fantini ()

No 160, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We study how US chief executive officers (CEOs) invest their deferred compensation plans depending on the firm's profitability. By looking at the correlation between the CEO's return on these plans and the firm's stock return, we show that deferred compensation is to a large extent invested in the company equity in good times and divested from it in bad times. The divestment from company equity in bad times arguably re ects CEOs' incentive to \abandon" the firm and to invest in alternative instruments to preserve the value of their deferred compensation plans. This result suggests that the incentive alignment effects of deferred compensation crucially depend on the firm's health status.

Keywords: Executive Compensation; Deferred Compensation; Corporate Distress (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2019, Revised 2019
New Economics Papers: this item is included in nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: CEO investment of deferred compensation plans and firm performance (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:160

DOI: 10.2139/ssrn.2884600

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