Duration of Executive Compensation

Radhakrishnan Gopalan, Todd Milbourn, Fenghua Song, Anjan V. Thakor

Research output: Contribution to journalArticlepeer-review

82 Scopus citations

Abstract

Extensive discussions on the inefficiencies of "short-termism" in executive compensation notwithstanding, little is known empirically about the extent of such short-termism. We develop a novel measure of executive pay duration that reflects the vesting periods of different pay components, thereby quantifying the extent to which compensation is short-term. We calculate pay duration in various industries and document its correlation with firm characteristics. Pay duration is longer in firms with more growth opportunities, more long-term assets, greater R&D intensity, lower risk, and better recent stock performance. Longer CEO pay duration is negatively related to the extent of earnings-increasing accruals.

Original languageEnglish (US)
Pages (from-to)2777-2817
Number of pages41
JournalJournal of Finance
Volume69
Issue number6
DOIs
StatePublished - Dec 1 2014

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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