Essays of Executive Compensation - Managerial Incentives and Disincentives

Executive compensation has been a central point of debates for the past 20 years, both in the academic circle and in Wall Street Journal. Have shareholders paid too much to the CEOs, or are the pay packages necessary for recruiting and keeping managerial talents? Are the structures of the pay packages reasonable, or are the compensation packages designed the way they are simply to facilitate more manipulation? The end to the debate between perspectives of "rent-seeking" (i.e., executives are always stealing shareholders’money away) ands "efficient contracting" (i.e., executive pays are set with economic rationales by their shareholders) does not appear to be coming any time soon. The thesis contributes to this debate by …rst identifying …rms whose CEOs are more optimisitic about their …rms’prospects are more likely to experience crashes in stock prices. Subsquently in Chapter 3 and 4, the thesis aims to o¤er economic explanations for current compensation structures.

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