CEO Optimism and Incentive Compensation
By Clemens A. Otto. 2014
135 citations recorded by the source corpus.
I study the effect of chief executive officer (CEO) optimism on CEO compensation. Using data on compensation in US firms, I provide evidence that CEOs whose option exercise behavior and earnings forecasts are indicative of optimistic beliefs receive smaller stock option grants, fewer bonus payments, and less total compensation than their peers. These findings add to our understanding of the interplay between managerial biases and remuneration and show how sophisticated principals can take advantage of optimistic agents by appropriately adjusting their compensation contracts.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/43f831685794f2bfb6476e0e67213f66b8eb6fa2
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Citations in the corpus
- The Impact of Firm Prestige on Executive Compensation (2017, background): “Otto (2014) shows that boards may pay CEOs less if they realize that the CEO is optimistic and likely to overvalue the firm’s equity-related compensation.”
- Executive Extraversion: Career and Firm Outcomes (2018, unknown): “…73 percent, with a 4 Other examples include Persico, Postlewaite, and Silverman (2004), Graham, Harvey, and Puri (2014), Adams, Keloharju, and Knupfer (2014), and Otto (2014), who explore the relation between compensation and non-cognitive characteristics such as height, appearance, and optimism.”
- Executive Overconfidence and Compensation Structure (2015, unknown): “advanced in Otto (2014), our findings are reflective of CEO overconfidence, not optimism.”