Duration of Executive Compensation

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

Research output: Contribution to journalArticle

52 Citations (Scopus)

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

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Executive compensation
Short-termism
Assets
Growth opportunities
Stock performance
Firm characteristics
Executive pay
Accruals
CEO pay
Industry
Inefficiency

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Gopalan, R., Milbourn, T., Song, F., & Thakor, A. V. (2014). Duration of Executive Compensation. Journal of Finance, 69(6), 2777-2817. https://doi.org/10.1111/jofi.12085
Gopalan, Radhakrishnan ; Milbourn, Todd ; Song, Fenghua ; Thakor, Anjan V. / Duration of Executive Compensation. In: Journal of Finance. 2014 ; Vol. 69, No. 6. pp. 2777-2817.
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Gopalan, R, Milbourn, T, Song, F & Thakor, AV 2014, 'Duration of Executive Compensation', Journal of Finance, vol. 69, no. 6, pp. 2777-2817. https://doi.org/10.1111/jofi.12085

Duration of Executive Compensation. / Gopalan, Radhakrishnan; Milbourn, Todd; Song, Fenghua; Thakor, Anjan V.

In: Journal of Finance, Vol. 69, No. 6, 01.12.2014, p. 2777-2817.

Research output: Contribution to journalArticle

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Gopalan R, Milbourn T, Song F, Thakor AV. Duration of Executive Compensation. Journal of Finance. 2014 Dec 1;69(6):2777-2817. https://doi.org/10.1111/jofi.12085