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XF-9YA4QB8-E
Research / Academic Paper ACTIVE

CEO Horizon, Optimal Pay Duration, and the Escalation of Short-Termism

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Abstract

ABSTRACT This paper studies optimal contracts when managers manipulate their performance measure at the expense of firm value. Optimal contracts defer compensation. The manager's incentives vest over time at an increasing rate, and compensation becomes very sensitive to short‐term performance. This generates an endogenous horizon problem whereby managers intensify performance manipulation in their final years in office. Contracts are designed to encourage effort while minimizing the adverse effects of manipulation. We characterize the optimal mix of short‐ and long‐term compensation along the manager's tenure, the optimal vesting period of incentive pay, and the dynamics of short‐termism over the CEO's tenure.

Source: resolved

Document Metadata

Issuer
Elsevier BV
Document Type
Research / Academic Paper
Publication Year
2019
Retrieved
5 May 2026
Source
Contact XFID for Access
Record ID
XF9YA4QB8E
Validation
Inferred by XFID

Topics

Agency TheoryCorporate Governance

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Academic / report citation
Elsevier BV (2019). CEO Horizon, Optimal Pay Duration, and the Escalation of Short-Termism. XFID: XF-9YA4QB8-E. Retrieved from https://xframework.id/XF9YA4QB8E
Identifier only
XF-9YA4QB8-E