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The impact of these boundary-changing moves will, in turn, reverberate across the parent firm and the divested unit operationally, managerially, and organizationally in numerous and varied areas, such as external partnerships, managerial compensation, and internal resource allocation (Feldman 2015b; Gertner et al. 2002).
This paper studies the effect of managerial compensation terms on the well-known "underinvestment" incentive.
We show that the use of privately-observed hedging may actually require greater pay-for-performance in managerial compensation.
We show that the relative seniority of debt and managerial compensation has important implications for the design of remuneration contracts.
Managerial compensation has already made some advances: The turn to restricted stock and vesting based on longer-term accounting metrics is best practice at some leading corporations today.
Our findings highlight the pitfalls and limitations of overreliance on equity in managerial compensation packages and the relatively greater influence of lower-level executives in their functional domain.
Similar(17)
(2013) LEN model How does a bonus tax on variable compensation affect managerial incentives and the manager's total compensation?
*Graham, John R., Si Li, and Jiaping Qiu, 2011, Managerial Attributes and Executive Compensation, Review of Financial Studies 24, 1944-1979.
(2001) Binary moral hazard model with continuous effort How do tax deductibility limits on fixed compensation affect managerial incentives and decisions?
Many executives spend too much time thinking about compensation when other managerial tools work just as well or better.
Financial market trends influence hiring and compensation decisions, change managerial outlooks, steer investments and technology, and strain collective bargaining agreements.
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