Conforming behaviors due to conformity pressure have been widely observed in economic and psychological experiments. This study examines how conformity pressure affects an agent's incentives and the principal's net payoff using behavioral contract theory. Specifically, we identify the conditions...

While the literature appeals to efficiency arguments from agency theory to explain the relative rise of CEO equity compensation, prior work has given less focus to CEO pay contracts based on equity and cash incentives that directly (analytically) maximize the total return of firm owners. The...

We examine whether pay differentials between the chief executive officer (CEO) and vice presidents (VPs) can be explained by firms’ strategic priorities. We find that firms that pursue prospector-type strategies have a larger CEO−VP difference in equity compensation. We argue that such a pay...

We find that clawback provision adoption travels across common ownership peers (i.e., firms that share at least one common owner) above and beyond other peer effects, including industry, geographical location, and board interlock. However, the peer effect is absent when the common owner is not...

We study an incentive problem of sequential tasks in a finite horizon dynamic setting. The principal can choose compensation incentive or termination threat. We characterize the optimal contracts and the principal’s strategy