Incentivizing CEOs via pay and forced turnover: Do tenure and managerial ability matter?
Direct pay and dismissal for poor performance are important instruments to incentivize CEOs. I empirically analyze how the use of them depends on tenure and managerial ability. For managers promoted from within a firm, ability is proxied by age at the time of promotion. For outside hires, I use cons...
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2023-03-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1640.pdf
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| Summary: | Direct pay and dismissal for poor performance are important instruments to incentivize
CEOs. I empirically analyze how the use of them depends on tenure and managerial ability. For
managers promoted from within a firm, ability is proxied by age at the time of promotion. For
outside hires, I use constructed measures of reputation based on media citations. Using a sample of
firms in S&P 1500, I find that pay and performance sensitivity of dismissal probability increase with
tenure. For outsider CEOs, better reputation increases pay, but decreases tenure sensitivity of pay
with stronger effects for more current measures. For both insiders and outsiders, ability decreases
the dismissal probability. |
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| ISSN: | 1841-8678 1844-0029 |