《《CEO Incentives》.pdfVIP

CEO Incentives, Cash Flow, and Investment Author(s): John Paul Broussard, Sheree A. Buchenroth and Eugene A. Pilotte Source: Financial Management, Vol. 33, No. 2 (Summer, 2004), pp. 51-70 Published by: Wiley on behalf of the Financial Management Association International Stable URL: /stable/3666158 . Accessed: 07/03/2014 01:59 Your use of the JSTOR archive indicates your acceptance of the Terms Conditions of Use, available at . /page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@. . Wiley and Financial Management Association International are collaborating with JSTOR to digitize, preserve and extend access to Financial Management. This content downloaded from 8 on Fri, 7 Mar 2014 01:59:11 AM All use subject to JSTOR Terms and Conditions CEO Incentives, Cash Flow, and Investment John Paul Broussard,Sheree A. Buchenroth,and EugeneA. Pilotte* Weestimate the impact ofchiefexecutive officer (CEO) incentives on the sensitivity ofinvestment to cash flow during a period of strong economic growth. Our measure of the alignment of managers and shareholders interests, pay-performance sensitivity (PPS), incorporates both stock and stock option holdings. Contrary to prior studies, we find that the dominant effect of increasing alignment is to reduce the overinvestment offree cash We no evidence that