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CEO investment of deferred compensation plans and firm performance

Domenico Rocco Cambrea, Stefano Colonnello, Giuliano Curatola, Giulia Fantini Orcid Logo

Journal of Business Finance & Accounting, Volume: 46, Issue: 7-8, Pages: 944 - 976

Swansea University Author: Giulia Fantini Orcid Logo

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DOI (Published version): 10.1111/jbfa.12382

Abstract

We study how US chief executive officers (CEOs) invest their deferred compensation plans depending on the firm’s profitability. By looking at the correlation between the CEO’s return on these plans and the firm’s stock return, we show that deferred compensation is to a large extent invested in the c...

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Published in: Journal of Business Finance & Accounting
ISSN: 0306-686X 1468-5957
Published: 2019
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URI: https://cronfa.swan.ac.uk/Record/cronfa50269
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first_indexed 2019-05-09T20:01:23Z
last_indexed 2021-01-20T04:11:59Z
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spelling 2021-01-19T11:21:26.1048411 v2 50269 2019-05-08 CEO investment of deferred compensation plans and firm performance 290e83934e79a0a29aec6575e0f82262 0000-0001-6923-0929 Giulia Fantini Giulia Fantini true false 2019-05-08 BAF We study how US chief executive officers (CEOs) invest their deferred compensation plans depending on the firm’s profitability. By looking at the correlation between the CEO’s return on these plans and the firm’s stock return, we show that deferred compensation is to a large extent invested in the company equity in good times and divested from it in bad times. The divestment from company equity in bad times arguably reflects CEOs’ incentive to abandon the firm and to invest in alternative instruments to preserve the value of their deferred compensation plans. This result suggests that the incentive alignment effects of deferred compensation crucially depend on the firm’s health status. Journal Article Journal of Business Finance & Accounting 46 7-8 944 976 0306-686X 1468-5957 Executive Compensation, Deferred Compensation, Corporate Distress 7 8 2019 2019-08-07 10.1111/jbfa.12382 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University 2021-01-19T11:21:26.1048411 2019-05-08T14:50:53.1579801 Faculty of Humanities and Social Sciences School of Management - Business Management Domenico Rocco Cambrea 1 Stefano Colonnello 2 Giuliano Curatola 3 Giulia Fantini 0000-0001-6923-0929 4 0050269-14052019104250.pdf Fantini1.pdf 2019-05-14T10:42:50.5030000 Output 1209462 application/pdf Accepted Manuscript true 2021-05-16T00:00:00.0000000 true eng
title CEO investment of deferred compensation plans and firm performance
spellingShingle CEO investment of deferred compensation plans and firm performance
Giulia Fantini
title_short CEO investment of deferred compensation plans and firm performance
title_full CEO investment of deferred compensation plans and firm performance
title_fullStr CEO investment of deferred compensation plans and firm performance
title_full_unstemmed CEO investment of deferred compensation plans and firm performance
title_sort CEO investment of deferred compensation plans and firm performance
author_id_str_mv 290e83934e79a0a29aec6575e0f82262
author_id_fullname_str_mv 290e83934e79a0a29aec6575e0f82262_***_Giulia Fantini
author Giulia Fantini
author2 Domenico Rocco Cambrea
Stefano Colonnello
Giuliano Curatola
Giulia Fantini
format Journal article
container_title Journal of Business Finance & Accounting
container_volume 46
container_issue 7-8
container_start_page 944
publishDate 2019
institution Swansea University
issn 0306-686X
1468-5957
doi_str_mv 10.1111/jbfa.12382
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Business Management{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Business Management
document_store_str 1
active_str 0
description We study how US chief executive officers (CEOs) invest their deferred compensation plans depending on the firm’s profitability. By looking at the correlation between the CEO’s return on these plans and the firm’s stock return, we show that deferred compensation is to a large extent invested in the company equity in good times and divested from it in bad times. The divestment from company equity in bad times arguably reflects CEOs’ incentive to abandon the firm and to invest in alternative instruments to preserve the value of their deferred compensation plans. This result suggests that the incentive alignment effects of deferred compensation crucially depend on the firm’s health status.
published_date 2019-08-07T04:01:39Z
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score 11.016593

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