I estimate a dynamic model in which a board of directors and a CEO interact to set the levels of CEO incentives and e¤ort. The intent is to understand the e¤ect that CEO incentives have on …rm value. In the model incentive levels are the result of CEO risk aversion, the cost of CEO e¤ort, the e¤ect of CEO e¤ort on …rm value, the volatility of shocks to …rm value, and the preference a board has ...

This paper presents a contracting model of governance based on the premise that CEOs are the main promoters of governance change. CEOs use their power to extract higher pay or private benefits, and different governance structures are preferred by different CEOs as they favor one or the other type of compensation. The model explains why good countrywide investor protection breeds good firm gover...

This study uses a random effect panel model to examine the impact of CEO traits and compensation on earnings performance and financial leverage for the 729 listed US companies in ExecuComp over the period of 2001– 2010. The results indicate that CEO cash compensation has a negative relationship with earnings performance, but that it has a positive impact on financial leverage. Moreover, for CEO...