Dynamic incentives and retirement
This paper examines multi-period compensation contracts when retirement is anticipated. Short-term contracts in long-term employment relationships are equivalent to a long-term renegotiation-proof contract. The dynamic of incentive rates is determined by (i) how and in which periods managerial effort affects the contractible performance measures; and by (ii) the time-series correlation of error terms in performance reports. The model explains why long-term investments can decrease while incentive rates increase as managers approach retirement. Earnings persistence is negatively associated to earnings-based incentive rates but, towards retirement, high earnings persistence implies increasing earnings-based incentive rates.
Year of publication: |
2008
|
---|---|
Authors: | Sabac, Florin |
Published in: |
Journal of Accounting and Economics. - Elsevier, ISSN 0165-4101. - Vol. 46.2008, 1, p. 172-200
|
Publisher: |
Elsevier |
Keywords: | Executive compensation Turnover Retirement Horizon problem Renegotiation |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
The Stewardship Role of Analyst Forecasts, and Discretionary Versus Non-Discretionary Accruals
Christensen, Peter O., (2013)
-
The Stewardship Role of Analyst Forecasts, and Discretionary Versus Non-Discretionary Accruals
Christensen, Peter O., (2014)
-
Real Incentive Effects of Soft Information
Christensen, Peter O., (2019)
- More ...