The Optimal Timing of CEO Compensation

Download or read book The Optimal Timing of CEO Compensation written by Pierre Chaigneau and published by . This book was released on 2017 with total page 9 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper extends a standard principal-agent model of CEO compensation by modeling the progressive attenuation of information asymmetries about firm value by shareholders in continuous time. The dynamics of the stock price process are affected by the continuous accumulation of exogenous shocks, and by progressive learning by shareholders. The optimal timing of compensation is the point in time at which the stock price is most informative about the manager's action. When exogenous shocks accumulate at a constant rate over time and learning occurs at a decreasing rate, the optimal timing of compensation is the point in time at which these two rates coincide.