Brian Cadman, University of Utah, will present a seminar based on his research paper, "Compensation Contract Design to Mitigate Adverse Selection: Inducement Grants and New CEO Announcements."
The presentation will examine how firms design compensation contracts to mitigate adverse selection problems when hiring a new CEO. Focusing on the sensitivity of inducement grants to the new CEO announcement return, the research predicts and finds that firms provide inducement grants that are more sensitive to the new CEO announcement return when costs of adverse selection problems are higher and information asymmetry about the new CEO is more severe. Consistent with inducement grant sensitivity mitigating adverse selection problems, findings show that the market reacts more favorably to new CEO announcements with inducement grants that are more sensitive to the announcement return.
Dr. Brian Cadman earned his undergraduate degree from Harvard University and his Ph.D. in accounting from the University of Oregon. Before joining the faculty at the University of Utah, Cadman was on the faculty at the Kellogg School of Management and The Wharton School. Cadman's research focuses on the use and implications of accounting information on compensation design as well as the role of external monitors and other governance mechanisms. His research on compensation consultants and CEO pay has been cited by the SEC in a recent ruling. His current research projects include studies on the Troubled Asset Relief Program, the role of venture capitalists in firms going public, and more recently, pension plans, severance agreements and the market for CEO talent. Cadman teaches managerial accounting at the masters level, where his expertise on performance measurement and decision making brings great value to the classroom.