EXECUTIVE PENSIONS AND OPTIMAL PAY STRUCTURE

Reilly S. White

《Advances in Quantitative Analysis of Finance and Accounting》 15期 (2017/12) Pp. 215-244

https://doi.org/10.6293/AQAFA.201712_15.0008

摘要

The model established by Dittmann and Maug (2007) uses a calibrated principal-agent framework with constant relative risk aversion to determine the optimal structure of executive pay. This model however omits the impact of pensions, which may be a significant component in executive compensation. We recalibrate the model with a pension factor to determine the new optimal structure of executive pay. Using a hand-collected dataset of 828 executives from 141 firms, we follow the theoretical model used by Carpenter (1998), Bettis, Bizjak, and Lemmon (2005), and Dittmann, Maug, and Spalt (2010) to calculate the optimal piecewise linear contract. This study provides a significantly refined answer to the original paper, and furthermore, finds little justification for high levels of pension compensation. Finally, we find that the pensions drive a substantial amount of contract mispricing among CEOs, but not for non-CEO executives.

關鍵字

Executive Compensation ； Corporate Finance ； Governance ； Pensions

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