Executive Overconfidence and Compensation Structure

We examine the impact of overconfidence on compensation structure. We test alternative hypotheses, drawing upon and extending existing theories. Our findings support the exploitation hypothesis: firms offer incentive-heavy compensation contracts to overconfident CEOs to exploit their positively-biased views of firm prospects. Overconfident CEOs receive more option-intensive compensation and this relation increases with CEO bargaining power. Exogenous shocks (SOX and FAS 123R) provide additional support for the findings. Overconfident non-CEO executives also receive more incentive-based pay, independent of CEO overconfidence, buttressing the notion that firms tailor compensation contracts to individual behavioral traits such as overconfidence

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Year of publication:	2016
Authors:	Humphery-Jenner, Mark
Other Persons:	Lisic, Ling Lei (contributor) ; Nanda, Vikram (contributor) ; Silveri, Sabatino (contributor)
Publisher:	[2016]: [S.l.] : SSRN
Subject:	Führungskräfte \| Managers \| Vergütungssystem \| Compensation system \| Managervergütung \| Executive compensation

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