Abstract
We study the relationship between incentive compensation and performance related CEO turnover. Our theoretical model predicts that the slope of the compensation contract and forced turnover may be complements. Our results support this prediction. We find that incentives and turnover are positively related. This relationship however, varies with the equity ownership of CEOs and does not hold for CEOs who own more than 5% equity. Moreover, this relationship is stronger if the firm under performs its industry. Our results suggest that high-powered incentives may increase the signaling power of performance measures and lead to higher likelihood of turnover.
| Original language | English |
|---|---|
| Pages (from-to) | 295-311 |
| Number of pages | 17 |
| Journal | Journal of Economics and Business |
| Volume | 61 |
| Issue number | 4 |
| DOIs | |
| State | Published - 2009 |
ASJC Scopus Subject Areas
- General Business,Management and Accounting
- Economics and Econometrics
Keywords
- CEO turnover
- Executive compensation
- Incentives
- Stock options
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