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Duration of Executive Compensation

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  • RADHAKRISHNAN GOPALAN
  • TODD MILBOURN
  • FENGHUA SONG
  • ANJAN V. THAKOR

Abstract

type="main"> Extensive discussions on the inefficiencies of “short-termism” in executive compensation notwithstanding, little is known empirically about the extent of such short-termism. We develop a novel measure of executive pay duration that reflects the vesting periods of different pay components, thereby quantifying the extent to which compensation is short-term. We calculate pay duration in various industries and document its correlation with firm characteristics. Pay duration is longer in firms with more growth opportunities, more long-term assets, greater R&D intensity, lower risk, and better recent stock performance. Longer CEO pay duration is negatively related to the extent of earnings-increasing accruals.

Suggested Citation

  • Radhakrishnan Gopalan & Todd Milbourn & Fenghua Song & Anjan V. Thakor, 2014. "Duration of Executive Compensation," Journal of Finance, American Finance Association, vol. 69(6), pages 2777-2817, December.
    • Handle: RePEc:bla:jfinan:v:69:y:2014:i:6:p:2777-2817
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    File URL: http://hdl.handle.net/10.1111/jofi.12085
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