OTCPK:EUCTF - Post by User
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Chutzpahon Jun 18, 2017 4:03am
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Performance for pay? The relationship between CEO incentive
Performance for pay? The relationship between CEO incentive Good long read for the week end... bear it mind while casting your vote on the Proxy....
Third, highly paid CEOs may become overconfident or overconfident CEOs may seek out high pay. Either way, highly paid overconfident CEOs may engage in sub-optimal behavior from the standpoint of shareholders, such as wasteful capital expenditures and empire building (Ben- David, Graham, and Harvey, 2008, Malmendier and Tate, 2005, 2008, 2009). Thus, if CEO overconfidence is increasing in pay, and if investors are not fully aware of potential shareholder wealth destroying activities of the overconfident CEO, this suggests a negative relation between CEO incentive pay and future firm returns.
https://online.wsj.com/public/resources/documents/CEOperformance122509.pdf