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Article: CEOs’ Outside Opportunities and Relative Performance Evaluation: Evidence from a Natural Experiment
Title | CEOs’ Outside Opportunities and Relative Performance Evaluation: Evidence from a Natural Experiment |
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Authors | |
Keywords | Relative performance evaluation CEO compensation CEO labor market |
Issue Date | 2020 |
Publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jfec |
Citation | Journal of Financial Economics, 2020, v. 137 n. 3, p. 679-700 How to Cite? |
Abstract | This paper examines the effect of CEOs’ outside opportunities on the use of relative performance evaluation (RPE) in CEO compensation. My tests exploit the staggered rejection of the Inevitable Disclosure Doctrine (IDD) by US state courts as an exogenous increase in CEOs’ outside opportunities. I find that the rejection of the IDD leads to a significant increase in the sensitivity of CEO pay to systematic performance (less RPE). This increase is more pronounced for CEOs with greater labor market mobility and industries where proprietary information is more important and not related to measures of governance quality. These results suggest that firms link CEO pay to systematic performance to retain talent and ensure participation. |
Persistent Identifier | http://hdl.handle.net/10722/281854 |
ISSN | 2023 Impact Factor: 10.4 2023 SCImago Journal Rankings: 13.655 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Na, K | - |
dc.date.accessioned | 2020-04-03T07:22:43Z | - |
dc.date.available | 2020-04-03T07:22:43Z | - |
dc.date.issued | 2020 | - |
dc.identifier.citation | Journal of Financial Economics, 2020, v. 137 n. 3, p. 679-700 | - |
dc.identifier.issn | 0304-405X | - |
dc.identifier.uri | http://hdl.handle.net/10722/281854 | - |
dc.description.abstract | This paper examines the effect of CEOs’ outside opportunities on the use of relative performance evaluation (RPE) in CEO compensation. My tests exploit the staggered rejection of the Inevitable Disclosure Doctrine (IDD) by US state courts as an exogenous increase in CEOs’ outside opportunities. I find that the rejection of the IDD leads to a significant increase in the sensitivity of CEO pay to systematic performance (less RPE). This increase is more pronounced for CEOs with greater labor market mobility and industries where proprietary information is more important and not related to measures of governance quality. These results suggest that firms link CEO pay to systematic performance to retain talent and ensure participation. | - |
dc.language | eng | - |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jfec | - |
dc.relation.ispartof | Journal of Financial Economics | - |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.subject | Relative performance evaluation | - |
dc.subject | CEO compensation | - |
dc.subject | CEO labor market | - |
dc.title | CEOs’ Outside Opportunities and Relative Performance Evaluation: Evidence from a Natural Experiment | - |
dc.type | Article | - |
dc.identifier.email | Na, K: kena@hku.hk | - |
dc.identifier.authority | Na, K=rp01920 | - |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1016/j.jfineco.2020.03.007 | - |
dc.identifier.scopus | eid_2-s2.0-85083892388 | - |
dc.identifier.hkuros | 309664 | - |
dc.identifier.volume | 137 | - |
dc.identifier.issue | 3 | - |
dc.identifier.spage | 679 | - |
dc.identifier.epage | 700 | - |
dc.identifier.isi | WOS:000554918000006 | - |
dc.publisher.place | Netherlands | - |
dc.identifier.issnl | 0304-405X | - |