Academics have long argued that incentive contracts for executives should be indexed to remove the influence of exogenous market factors. Little evidence has been found that firms engage in such practices, also termed 'relative performance evaluation'. We argue that firms may not gainmuch by...

Employee stock options represent a significant potential source of dilution for many shareholders. It is well known that reported earnings tend to understate the associated costs, but an efficient stock market will show no such bias. If by contrast stock prices underestimate the future costs...

Proponents of EVA and related 'shareholder value' measures intend to replace earnings and to supplement stock returns by including their own measures in managerial compensation schemes. Stern Stewart's EVA appears to be the most widely recognized measure. However, there are not very many firms...

We study the motive of using equity-based pay in executive compensation: the risk-sharing motive versus the performance-measuring motive. The empirical design goes through the relationship between equity-based pay and stock price informativeness (SPI). We find equity-based pay decreases in SPI,...

We study the effects of stock price informativeness (SPI) on the complexity of executive compensation. Using textual analysis of SEC proxy statements to construct measures of compensation complexity, we find informative stock prices reduce pay complexity. Using mutual fund redemption as an...