Dr. Sabatino Silveri published in the Journal of Financial Economics
For release: February 22, 2016
Dr. Sabatino Dino Silveri, assistant professor of Finance, recently had his paper
entitled "Executive overconfidence and compensation structure" published in the Journal of Financial Economics. The paper was co-authored with Drs. Mark Humphery-Jenner, UNSW Australia; Ling Lei
Lisic, George Mason University; and Vikram Nanda, Rutgers University.
The authors examine the impact of overconfidence on compensation structure. Their findings support the exploitation hypothesis: firms offer incentive-heavy compensation contracts to overconfident chief executive officers (CEOs) to exploit their positively biased views of firm prospects. Overconfident CEOs receive more option-intensive compensation and this relation increases with CEO bargaining power. Exogenous shocks [Sarbanes-Oxley Act of 2002 (SOX) and Financial Accounting Standard (FAS 123R)] provide additional support for the findings. Overconfident non-CEO executives also receive more incentive-based pay, independent of CEO overconfidence, buttressing the notion that firms tailor compensation contracts to individual behavioral traits such as overconfidence. Click here to read the complete article.