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Maté Széles

Essays on Executive Compensation, Insider Trading, and Misreporting

Summary

This dissertation contributes to our understanding of information asymmetry among corporate insiders and capital providers, and the role that executive compensation contracts play in mitigating this information asymmetry. More specifically, I study corporate decisions to (re-)contract with executives, decisions about specific contract features, and how corporate contracting decisions provide context for value-relevant information signals to capital providers. In the first chapter, I study how firms contract with successor executives after the revelation of accounting restatements. I find that firms that recently restated their financial statements pay a premium to new CEOs hired from outside the firm, which suggests that restating firms pay a labor market premium to new outside executives. In the second chapter, co-authored with Stefano Cascino (London School of Economics) and David Veenman (University of Amsterdam), we re-examine the relation between financial reporting quality and CEO inside debt holdings, where inside debt refers to debt-like compensation incentives such as defined pension benefits and deferred shared-based compensation. Our results suggest that CEO inside debt ownership is not associated with higher quality financial reporting. In the third chapter, co-authored with Brian Cadman (University of Utah), we study the information asymmetry between corporate insiders and investors, and find that executive compensation contract features relate to the informativeness of insider trades. Our results suggest that disclosures of vested equity holdings and equity holding requirements provide context to the information revealed by insider trades.