Year: 2003
Type: report
Abstract: 1 Market based compensation, trading and liquidity This paper examines the role of trading and liquidity in a large competitive market with dispersed heterogenous information on market-based management compensation. The paper recognizes the endogenous nature of a firm’s stock price- it is the outcome of self-interested speculative trading motivated by imperfect information about future firm value. Using the stock price as performance measure means bench-marking the manager’s performance against the market’s expectation of that performance. Our main result is that the degree of market-based compensation is proportional to market liquidity, which is a measure of the ease of information trading. 2
Authors: Riccardo Calcagno, Florian Heider
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2134913402