The Impact of Risk and Monitoring on CEO Equity Incentives: Evidence from Suppliers with Major Customers
Ana M. Albuquerque
Boston University School of Management
Peter D. Wysocki
University of Miami - School of Business Administration
April 25, 2013
This paper provides new empirical insights on the association between a firm’s operating structure and the level of CEO equity incentives. We investigate a sample of supplier firms that rely on a few large customers for most of their revenues. We predict that supplier firms with higher customer concentration face both higher idiosyncratic risk and lower monitoring costs and, as a result, rely less on equity-based managerial incentive compensation contracts. Our empirical results support these predictions.
Number of Pages in PDF File: 52
Keywords: CEO, Compensation, Customers, Incentives, Monitoring, Risk, Suppliers
JEL Classification: G30, D81, M40working papers series
Date posted: October 14, 2011 ; Last revised: April 27, 2013
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