Dispersed Information and CEO Incentives

摘要: I measure the social cost of stock-based compensation schemes in a model which CEO learns from market prices. In my model, all agents commit small correlated error when forming their expectations about future productivity. The equilibrium stock price thus aggregates private information with noise. show that scheme leads to overuse by factor three, turn makes excess return and investment growth excessively volatile. calibrate DSGE embeds this mechanism, estimate an implied welfare loss 0.55% permanent consumption. Surprisingly, if households were given choice within preserving status quo or forcing ignore information, they would choose latter. ∗I like thank Fernando Alvarez, Will Cong, Douglas Diamond, Tarek Hassan, Zhiguo He, Juhani Linnainmaa, Thomas Mertens, Stavros Panageas, David Schreindorfer, Nancy Stokey, Amir Sufi, Harald Uhlig, Pietro Veronesi, Verena Werkmann, Mirko Wiederholt for helpful comments discussion. am also grateful seminar participants at Goethe University Frankfurt Chicago (Econ Booth). †Email: schneemeier@uchicago.edu; Website: http://home.uchicago.edu/schneemeier/