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Topic
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Explicit Versus Implicit Contracts: Evidence From CEO Employment Agreements
Resource type
Authors/contributors
- Gillan, Stuart L. (Author)
- Hartzell, Jay C. (Author)
- Parrino, Robert (Author)
Title
Explicit Versus Implicit Contracts: Evidence From CEO Employment Agreements
Abstract
We report evidence on the determinants of whether the relationship between a firm and its Chief Executive Officer (CEO) is governed by an explicit (written) or an implicit agreement. We find that fewer than half of the CEOs of S&P 500 firms have comprehensive explicit employment agreements. Consistent with contracting theory, explicit agreements are more likely to be observed and are likely to have a longer duration in situations in which the sustainability of the relationship is less certain and where the expected loss to the CEO is greater if the firm fails to honor the agreement.
Publication
The Journal of Finance
Volume
64
Issue
4
Pages
1629-1655
Date
2009
Citation
Gillan, S. L., Hartzell, J. C., & Parrino, R. (2009). Explicit Versus Implicit Contracts: Evidence From CEO Employment Agreements. The Journal of Finance, 64, 1629–1655.
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