Pay for Short-Term Performance: Executive Compensation in Speculative Markets

Pay for Short-Term Performance: Executive Compensation in Speculative Markets

Patrick Bolton, José Scheinkman, Wei Xiong

Series number :

Serial Number: 
079/2005

Date posted :

April 01 2005

Last revised :

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Keywords

  • executive compensation • 
  • shareholders conflict

We argue that the root cause behind the recent corporate scandals associated with CEO pay is the technology bubble of the latter half of the 1990s. Far from rejecting the optimal incentive contracting theory of executive compensation, the recent evidence on executive pay can be reconciled with classical agency theory once one expands the framework to allow for speculative stock markets.

Authors

Real name: 
José Scheinkman
Real name: 
Wei Xiong