We present robust evidence that firms enlarge the executive pay gap when executive mobility is constrained by the enhanced enforceability of non-compete agreements. We interpret this finding as evidence that firms increase tournament incentives to keep executives incentivized after the loss of...

We examine how chief executive officers' (CEOs) innate risk aversion influences the size and structure of their compensation contracts. In so doing, we estimate managerial risk aversion based on the Big Five personality traits—openness, conscientiousness, extraversion, agreeableness, and...

How do firms modify CEO risk-incentive compensation in response to increased foreign competition? Theoretically we show the answer is ambiguous: increased competition can result in firms either increasing or decreasing the CEO's risk-taking incentives. Empirically using a quasi-natural...

In this study, we examine whether CEOs' stock-based compensation has any relationship with the disclosure of highly proprietary information. While prior studies suggest that stock-based compensation provides managers with an incentive to enhance their voluntary disclosures in general, we argue...

This paper examines the effects of promotion-based tournament incentives for non-CEO executives on corporate innovation. We find that firms with greater tournament incentives, which are measured as the pay gap between the CEO and other executives, are associated with a higher level of patent...

How does access to public equity markets affect real outcomes? We examine the human capital of IPO-filing firms and how going public affects their labor force. While IPO-filing firms have high average wages and limited industrial diversification, a success-ful IPO increases departures of...

We examine the optimal design of managerial compensation in a setting in which a manager must be induced to maximize shareholder value while managing the firm's cash flow risks. Our model shows that, while high-powered incentive pay (e.g., options) induces the manager to increase shareholder...

This paper develops an agency model to analyze the optimality of executive stock option compensation in the presence of information manipulation. The analyses show that although information manipulation is positively related to the size of option compensation, the relative size of...

The level of Chief Executive Officer (CEO) pay responds asymmetrically to good and bad news about the CEO's ability. The average CEO captures approximately half of the surpluses from good news, implying CEOs and shareholders have roughly equal bargaining power. In contrast, the average CEO bears...

This paper builds on Rosen (1981) and Hvide (2002) to provide a simple framework that elucidates the nature of incentives in the tournaments among top executives in both the external managerial labor market for the top executive positions in other companies and within the executives' own firm...