Dynamic Adjustment of CEO Incentives, Contracting Frictions, and Firm Performance Free

We especially thank Brian Cadman (editor) and two anonymous reviewers for their thoughtful comments and suggestions. We also thank Chris Armstrong, Laura Breuer, John Core, William Cready, Alex Edmans, Mei Feng, Mark Flannery, Richard Frankel (discussant), Pingyang Gao, Zhaoyang Gu, Wayne Guay, Thomas Hemmer, John Kepler, Swaminathan Kalpathy, Jin Liu, Jim Omartian, Andrea Pawliczek (discussant), Lin Peng (discussant), Clair Wang (discussant), and seminar participants at The Chinese University of Hong Kong, Cornell University, University of Houston, The University of Memphis, New York University, The University of Oklahoma, Stanford University, Tel Aviv University, Wuhan University, the 2018 Massachusetts Institute of Technology Asia Conference, the 2019 Dopuch Conference at Washington University in St. Louis, and The University of North Carolina at Chapel Hill (UNC) Kenan-Flagler Business School for helpful discussions and comments. The authors thank the UNC Kenan-Flagler Business School, The University of Texas at Dallas, and Cheung Kong Graduate School of Business for financial support. Zhonglan Dai is the corresponding author.

Robert Bushman, The University of North Carolina at Chapel Hill, Kenan-Flagler Business School, Chapel Hill, NC, USA; Zhonglan Dai, The University of Texas at Dallas, Jindal School of Management, Richardson, TX, USA; Weining Zhang, Cheung Kong Graduate School of Business, Beijing, China.

Editor’s note: Accepted by Brian Cadman, under the Senior Editorship of  W. Robert Knechel.