Information-based stock trading, executive incentives, and the principal-agent problem / Qiang Kang in Management science, Vol. 56 N° 4 (Avril 2010)  

Public ISBD [article]  inManagement science > Vol. 56 N° 4 (Avril 2010) . - pp. 682-698 Titre : Information-based stock trading, executive incentives, and the principal-agent problem Type de document : texte imprimé Auteurs : Qiang Kang, Auteur ; Qiao Liu, Auteur Année de publication : 2010 Article en page(s) : pp. 682-698 Note générale : Management Langues : Anglais (eng) Mots-clés : Risk–incentive trade-off Endogenous information-based trading Pay-performance sensitivity Adjusted pin Calibration Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : We examine the role of information-based stock trading in affecting the risk–incentive relation. By incorporating an endogenous informed trading into an optimal incentive contracting model, we analytically show that, apart from reducing incentives, a greater risk increases the level of information-based trading, which consequently enhances executive incentives and offsets the negative risk–incentive relation. We calibrate the model and find that the economic magnitude of this incentive-enhancement effect is significant. Our empirical test using real-world executive compensation data lends strong support to the model prediction. Our results suggest that principals (boards of directors) should consider underlying stock trading characteristics when structuring executive incentives. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/56/4.toc [article] Information-based stock trading, executive incentives, and the principal-agent problem [texte imprimé] / Qiang Kang, Auteur ; Qiao Liu, Auteur . - 2010 . - pp. 682-698. Management Langues : Anglais (eng) in Management science > Vol. 56 N° 4 (Avril 2010) . - pp. 682-698 Mots-clés : Risk–incentive trade-off Endogenous information-based trading Pay-performance sensitivity Adjusted pin Calibration Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : We examine the role of information-based stock trading in affecting the risk–incentive relation. By incorporating an endogenous informed trading into an optimal incentive contracting model, we analytically show that, apart from reducing incentives, a greater risk increases the level of information-based trading, which consequently enhances executive incentives and offsets the negative risk–incentive relation. We calibrate the model and find that the economic magnitude of this incentive-enhancement effect is significant. Our empirical test using real-world executive compensation data lends strong support to the model prediction. Our results suggest that principals (boards of directors) should consider underlying stock trading characteristics when structuring executive incentives. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/56/4.toc

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