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SUMMARY:Dispersed Information and CEO Incentives
DTSTART:20150203T120000
DTEND:20150203T130000
DTSTAMP:20260510T135125Z
UID:76582c3eb9acc93cf70ebec2ccf1ef7e2e3a749e52e7c6d0b9ff5983
CATEGORIES:Conferences - Seminars
DESCRIPTION:Jan Schneemeier\n(University of Chicago)\nI measure the social
  cost of stock-based compensation schemes in a model in which the CEO lear
 ns from market prices. In my model\, all agents commit a small correlated 
 error when forming their expectations about future productivity. The equil
 ibrium stock price thus aggregates private information with noise. I show 
 that a stock-based compensation scheme leads the CEO to overuse the price 
 information by a factor of three\, which in turn makes the excess return a
 nd investment growth excessively volatile. I calibrate a DSGE model that e
 mbeds this mechanism\, and estimate an implied welfare loss of 0.55% of pe
 rmanent consumption. Surprisingly\, if households were given the choice wi
 thin this model of preserving the status quo or forcing the CEO to ignore 
 all price information\, they would choose the latter.
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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