2026-09-23T07:41:56Zhttps://dspace.mit.edu/server/oai/requestoai:dspace.mit.edu:1721.1/84792022-01-13T07:54:52Zcom_1721.1_7582com_1721.1_7581col_1721.1_131022
S.P. Kothari.
Li, Ying, 1971 Mar. 16-
Sloan School of Management.
Sloan School of Management
2005-08-23T20:29:48Z
2005-08-23T20:29:48Z
2002
2002
http://hdl.handle.net/1721.1/8479
50758934
Thesis (Ph.D.)--Massachusetts Institute of Technology, Sloan School of Management, 2002.
Includes bibliographical references.
My thesis examines the joint hypotheses that firms set optimal levels for CEO incentives, and that firms and CEOs jointly correct deviations from these optimal levels through equity grants and CEO portfolio rebalancing. I investigate two equity-based CEO incentives, pay-for-performance sensitivity and risk-taking incentive. Pay-for-performance sensitivity is defined as the change in CEO wealth for a given change in the firm's stock price, while risk-taking incentive the sensitivity of CEO wealth to equity risk. Chapter One examines the relation between incentive deviations and subsequent incentive adjustments based on Black-Scholes model (1973). I use this model to estimate both the incentives from CEOs' equity holdings and adjustments to these incentives. I find that firms' and CEOs' combined annual adjustment to pay-for-performance sensitivity or risk-taking incentive is negatively related to the degree that each incentive deviates from its target level at the beginning of the year, consistent with firms and CEOs jointly correcting the incentive deviations. Overall, the findings suggest that firms and CEOs coordinate their equity-granting and portfolio-rebalancing decisions to manage optimal CEO incentive levels consistent with economic theory. Chapter Two examines the relation between incentive deviations and subsequent incentive adjustments based on a certainty-equivalent approach. I only use this alternative approach to re-estimate incentive deviations, and still use Black-Scholes model to calculate incentive adjustments. The results support my findings in Chapter One.
by Ying Li.
Ph.D.
77 leaves
5351691 bytes
5351450 bytes
application/pdf
application/pdf
eng
Massachusetts Institute of Technology
M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.
http://dspace.mit.edu/handle/1721.1/7582
Sloan School of Management.
Maintaining optimal CEO incentives through equity grants and CEO portfolio rebalancing
Maintaining optimal chief executive officer incentives through equity grants and chief executive officer portfolio rebalancing
Thesis
application/pdf
Publication
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