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Pay for Short-Term Performance: Executive Compensation in Speculative Markets


Patrick Bolton


Columbia Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Jose A. Scheinkman


Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Wei Xiong


Princeton University - Department of Economics; National Bureau of Economic Research (NBER)
March 2006

NBER Working Paper No. w12107

Abstract:     
We argue that the root cause behind the recent corporate scandals associated with CEO pay is the technology bubble of the latter half of the 1990s. Far from rejecting the optimal incentive contracting theory of executive compensation, the recent evidence on executive pay can be reconciled with classical agency theory once one expands the framework to allow for speculative stock markets.

Number of Pages in PDF File: 28

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Date posted: May 15, 2006  

Suggested Citation

Bolton, Patrick, Scheinkman, Jose A. and Xiong, Wei, Pay for Short-Term Performance: Executive Compensation in Speculative Markets (March 2006). NBER Working Paper No. w12107. Available at SSRN: http://ssrn.com/abstract=892132

Contact Information

Patrick Bolton (Contact Author)
Columbia Business School - Department of Economics ( email )
3022 Broadway
New York, NY 10027
United States
HOME PAGE: http://www0.gsb.columbia.edu/faculty/pbolton/

Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Jose A. Scheinkman
Princeton University - Department of Economics ( email )
26 Prospect Avenue
Princeton, NJ 08544
United States
609-258-4020 (Phone)
609-258-6419 (Fax)
HOME PAGE: http://www.princeton.edu/~joses

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Wei Xiong
Princeton University - Department of Economics ( email )
Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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