Management Compensation and the Managerial Labor Market

11 Pages Posted: 11 Dec 2003

See all articles by Michael C. Jensen (Deceased)

Michael C. Jensen (Deceased)

Harvard University - Business School (HBS); SSRN; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit

Jerold L. Zimmerman

University of Rochester - Simon Business School

Abstract

The papers in this volume and briefly summarized in this introduction document that: (1) executive compensation is positively related to share price performance: (2) poor firm performance is associated with increased executive turnover; (3) managers choose accounting accruals in ways, that increase the value of their bonus awards; (4) the adoption of new short- and long-term executive compensation plans and golden parachutes are associated with positive share price reactions; (5) the death of a firm's founder is associated with positive share price reactions; and (b) managers are less likely to make merger bids that lower their stock prices when they hold more stock in their firm. These findings are interpreted as generally supporting the view that executive compensation packages help align managers' and shareholders' interests.

Keywords: executive compensation, performance, golden parachutes, share price reaction, manager and shareholder interest

Suggested Citation

Jensen (Deceased), Michael C. and Zimmerman, Jerold L., Management Compensation and the Managerial Labor Market. Journal of Accounting and Economics, Vol. 7 , No. 1-3, pp. 3-9, 1985, Available at SSRN: https://ssrn.com/abstract=476422 or http://dx.doi.org/10.2139/ssrn.476422

Michael C. Jensen (Deceased) (Contact Author)

Harvard University - Business School (HBS)

SSRN

HOME PAGE: http://ssrn.com/author=9

National Bureau of Economic Research (NBER)

European Corporate Governance Institute (ECGI)

Harvard University - Accounting & Control Unit

Jerold L. Zimmerman

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States
585-275-3397 (Phone)
585-442-6323 (Fax)

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