Executive overconfidence and compensation structure

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• 作者：Mark Humphery-Jenner^a ; ^{mlhj@unsw.edu.au" class="auth_mail" title="E-mail the corresponding author} ; Ling Lei Lisic^b ; ^{llisic@gmu.edu" class="auth_mail" title="E-mail the corresponding author} ; Vikram Nanda^c ; ^d ; ^{vikram.nanda@utdallas.edu" class="auth_mail" title="E-mail the corresponding author} ; Sabatino Dino Silveri^e ; ^{ssilveri@memphis.edu" class="auth_mail" title="E-mail the corresponding author}
• 关键词：Overconfidence ; Compensation structure ; Incentive compensation
• 刊名：Journal of Financial Economics
• 出版年：2016
• 出版时间：March 2016
• 年：2016
• 卷：119
• 期：3
• 页码：533-558
• 全文大小：678 K

文摘

We examine the impact of overconfidence on compensation structure. Our findings support the exploitation hypothesis: firms offer incentive-heavy compensation contracts to overconfident Chief Executive Officers (CEOs) to exploit their positively biased views of firm prospects. Overconfident CEOs receive more option-intensive compensation and this relation increases with CEO bargaining power. Exogenous shocks (Sarbanes-Oxley Act of 2002 (SOX) and Financial Accounting Standard (FAS) 123R) provide additional support for the findings. Overconfident non-CEO executives also receive more incentive-based pay, independent of CEO overconfidence, buttressing the notion that firms tailor compensation contracts to individual behavioral traits such as overconfidence.