Are Ex-Ante CEO Severance Pay Contracts Consistent with Efficient Contracting?

Efficient contracting predicts that ex-ante severance pay contracts are offered to CEOs as protection against downside risk and to encourage investment in risky positive net-present-value projects. Consistent with this prediction, we find that ex-ante contracted severance pay is positively associated with proxies for a CEO’s risk of dismissal and costs the CEO would incur from dismissal. Additionally, we show that the contracted severance payment amount positively impacts CEO risk-taking and the extent to which a CEO invests in projects that have a positive net-present-value. Overall, our findings imply that ex-ante severance pay contracts are consistent with efficient contracting

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Year of publication:	2016
Authors:	Cadman, Brian D. ; Campbell, John L. ; Klasa, Sandy
Publisher:	[S.l.] : SSRN
Subject:	Führungskräfte \| Managers \| Abfindung \| Redundancy pay \| Leistungsanreiz \| Performance incentive \| Vertrag \| Contract \| Prinzipal-Agent-Theorie \| Agency theory \| Vertragstheorie \| Contract theory \| Arbeitsvertrag \| Labour contract

Extent:	1 Online-Ressource (52 p)
Type of publication:	Book / Working Paper
Language:	English
Notes:	In: Journal of Financial and Quantitative Analysis (JFQA), Vol. 51, No. 3, 2016 Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 15, 2011 erstellt
Other identifiers:	10.2139/ssrn.1773070 [DOI]
Classification:	G31 - Capital Budgeting; Investment Policy ; G32 - Financing Policy; Capital and Ownership Structure ; G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10014185462