Incentive Compensation when Executives can Hedge the Market: Evidence of Relative Performance Evaluation in the Cross Section

By G. Garvey, Todd Milbourn. 2003

325 citations recorded by the source corpus.

View Paper: https://www.semanticscholar.org/paper/0f687e53e818438d47c45f49419f409a22a772f1

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Finance

Citations in the corpus

Executive Stock Options, Differential Risk-Taking Incentives, and Firm Value (2012, background): “Since CEOs are generally presumed to be able to trade the market portfolio (Jin, 2002; Garvey and Milbourn, 2003), we focus on the hedging benefit of taking systematic rather than idiosyncratic risk.”
Relative Performance Evaluation and Related Peer Groups in Executive Compensation Contracts (2011, unknown): “Executive Attributes Garvey and Milbourn (2003) posit that executives’ ability to hedge market-wide risk substitutes for the benefits of RPE, and find that firms with wealthier and older CEOs (proxies”
Managerial Attributes and Executive Compensation (2011, unknown): “…Gabaix and Landier, 2008, Hubbard and Palia, 1995, Joskow et al., 1996, Kraft and Niederprum, 1999, Perry and Zenner, 2001), a few papers control for manager fixed effects (Aggarwal and Samwick, 1999, Garvey and Milbourn, 2003, Perry and Zenner, 2001), and none control for both at the same time.”
Strategic Flexibility and the Optimality of Pay for Sector Performance (2010, background): “2Aggarwal and Samwick (1999a, 1999b), Antle and Smith (1986), Janakiraman et al. (1992), and Garvey and Milbourn (2003) offer studies that jointly span the 1980’s through early 2000’s. 3The more appropriate term for this phenomenon is “pay for firm performance due to luck,” but the rather elegant…”
CEOs' Outside Employment Opportunities and the Lack of Relative Performance Evaluation in Compensation Contracts (2006, unknown): “[INSERT TABLE VI HERE] D. Firm level hedging Garvey and Milbourn (2003) argue that compensation committees do not filter out market-wide changes from executive compensation (i.e., the absence of RPE) because executives can filter out such changes on their own by accessing the capital market.”
Portfolio Manager Compensation in the U.S. Mutual Fund Industry (2019, background): “Finally, Garvey and Milbourn (2003) suggest that relative performance pay may induce unwanted managerial turnover if managers’ outside opportunities fluctuate with the market.”
Peer Firms in Relative Performance Evaluation (2009, unknown): “Garvey and Milbourn (2003) model and test whether RPE usage in stock returns varies with the level of CEO wealth diversification.”
Managerial Ownership and Performance (2009, unknown): “From a manager’s perspective, an optimal incentive contract should take into account the manager’s desire to diversify away the idiosyncratic component of corporate risk (Garvey and Milbourn, 2003; Jin, 2002).”
Generalists versus specialists: Lifetime work experience and chief executive officer pay (2013, background): “…complement this work by measuring skills acquired during an executive professional career and showing that these skills help to explain CEO pay.4 3 Garvey and Milbourn (2003) and Milbourn (2003) also link CEO pay, pay-performance sensitivities, and relative performance evaluations to CEO…”