Journal of Financial Economics Vol. 128 No. 2 2018
CEO attributes, compensation, and firm value: Evidence from a structural estimation
Abstract
I present and estimate a dynamic model of chief executive officer (CEO) compensation and effort provision. I find that variation in CEO attributes explains the majority of variation in compensation (equity and total) but little of the variation in firm value. The primary drivers of cross-sectional compensation are risk aversion and influence on the board. Additionally, I estimate the magnitude of CEO agency issues. Removing CEO influence increases shareholder value in the typical firm by 1.74%, making CEOs risk neutral increases shareholder value by 16.12%, and removing all agency frictions increases shareholder value by 28.99%.
- DOI
- 10.1016/j.jfineco.2018.02.006
- Volume
- 128
- Issue
- 2
- Pages
- 378-401
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib