Three essays on the dark side of managerial compensation

My three essays examine some consequences of managerial compensation structures on shareholders' value and corporate investment decisions. In the first essay, I examine the market response to the announcement of option backdating scandal and report market reaction of unexpectedly small magnitude. I compare the characteristics of option backdating companies to a group of control firms with comparable features in my second essay. I find that backdating firms are younger and more volatile in operating performance but do not necessarily exhibit weaker structures of corporate governance. In the last essay, I examine the presence of managerial overconfidence based upon CEO's option exercising decision and propose a metric to measure it. I provide evidence that the investment behavior of overconfident CEOs exhibits greater sensitivity to cashflows.