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- Title
Managerial Attributes, Incentives, and Performance.
- Authors
Coles, Jeffrey L; Li, Zhichuan (Frank)
- Abstract
We examine the relative importance of observed and unobserved firm- and manager-specific heterogeneities in determining executive compensation incentives and firm policy, risk, and performance. First, we decompose executive incentives into time-variant and time-invariant firm and manager components. Manager fixed effects supply 73% (60%) of explained variation in delta (vega). Second, controlling for manager fixed effects alters parameter estimates and corresponding inference on observed firm and manager characteristics. Third, larger CEO delta (vega) fixed effects predict better firm performance (riskier corporate policies and higher firm risk). These results suggest that the delta (vega) fixed effect captures managerial ability (risk aversion). (JEL G3, G32, G34, J24, J31, J33) Received September 7, 2018; editorial decision February 21, 2020 by Editor Andrew Ellul.
- Subjects
EXECUTIVE compensation; ORGANIZATIONAL performance; CORPORATE governance; RISK aversion
- Publication
Review of Corporate Finance Studies, 2020, Vol 9, Issue 2, p256
- ISSN
2046-9128
- Publication type
Article
- DOI
10.1093/rcfs/cfaa004