Duration of Executive Compensation

Radhakrishnan Gopalan, Todd Milbourn, Fenghua Song and Anjan Thakor ()

Journal of Finance, 2014, vol. 69, issue 6, 2777-2817

Abstract: type="main">

Extensive discussions on the inefficiencies of “short-termism” in executive compensation notwithstanding, little is known empirically about the extent of such short-termism. We develop a novel measure of executive pay duration that reflects the vesting periods of different pay components, thereby quantifying the extent to which compensation is short-term. We calculate pay duration in various industries and document its correlation with firm characteristics. Pay duration is longer in firms with more growth opportunities, more long-term assets, greater R&D intensity, lower risk, and better recent stock performance. Longer CEO pay duration is negatively related to the extent of earnings-increasing accruals.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:69:y:2014:i:6:p:2777-2817

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