Please use this identifier to cite or link to this item: http://arks.princeton.edu/ark:/88435/dsp01br86b3578
 Title: Executive Compensation and Incentives: The Impact of Takeover Legislation Authors: Bertrand, MarianneMullainathan, Sendhil Keywords: executive compensationincentives & takeover lows Issue Date: 1-Oct-1998 Series/Report no.: Working Papers (Princeton University. Industrial Relations Section) ; 404 Abstract: We investigate the impact of changes in states’ anti-takeover legislation on executive compensation. We ﬁnd that both pay for performance sensitivities and mean pay increase for the ﬁrms affected by the legislation (relative to a control group). These ﬁndings are partially consistent with an optimal contracting model of CEO pay as well as with a skimming model in which reduced takeover fears allow CEOs to skim more. We compute lower bounds on the relative risk aversion coefficients implied by our ﬁndings. These lower bounds are relatively high, indicating that the increase in mean pay may have been more than needed to maintain CEOs’ individual rationality constraints. Under both models however, our evidence shows that the increased pay for performance offsets some of the incentive reduction caused by lower takeover threats. URI: http://arks.princeton.edu/ark:/88435/dsp01br86b3578 Appears in Collections: IRS Working Papers

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