Corporate governance, chief executive officer compensation, and firm performance 1 The financial support of Nomura Securities and Ernst & Young LLP is gratefully acknowledged. We appreciate the able research assistance of Dan Nunn. We acknowledge the helpful comments of Abbie Smith (the referee), Kevin Murphy, and workshop participants at Columbia University, the University of California – Los Angeles, the University of Colorado – Boulder, Harvard University, George Washington University, Massachusetts Institute of Technology, New York University, Stanford University, and Tempe University. 1

Corporate governance, chief executive officer compensation, and firm performance 1 The financial... We find that measures of board and ownership structure explain a significant amount of cross-sectional variation in CEO compensation, after controlling for standard economic determinants of pay. Moreover, the signs of the coefficients on the board and ownership structure variables suggest that CEOs earn greater compensation when governance structures are less effective. We also find that the predicted component of compensation arising from these characteristics of board and ownership structure has a statistically significant negative relation with subsequent firm operating and stock return performance. Overall, our results suggest that firms with weaker governance structures have greater agency problems; that CEOs at firms with greater agency problems receive greater compensation; and that firms with greater agency problems perform worse. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

Corporate governance, chief executive officer compensation, and firm performance 1 The financial support of Nomura Securities and Ernst & Young LLP is gratefully acknowledged. We appreciate the able research assistance of Dan Nunn. We acknowledge the helpful comments of Abbie Smith (the referee), Kevin Murphy, and workshop participants at Columbia University, the University of California – Los Angeles, the University of Colorado – Boulder, Harvard University, George Washington University, Massachusetts Institute of Technology, New York University, Stanford University, and Tempe University. 1

Loading next page...
 
/lp/elsevier/corporate-governance-chief-executive-officer-compensation-and-firm-c04FPKCaP7
Publisher
Elsevier
Copyright
Copyright © 1999 Elsevier Science S.A.
ISSN
0304-405x
D.O.I.
10.1016/S0304-405X(98)00058-0
Publisher site
See Article on Publisher Site

Abstract

We find that measures of board and ownership structure explain a significant amount of cross-sectional variation in CEO compensation, after controlling for standard economic determinants of pay. Moreover, the signs of the coefficients on the board and ownership structure variables suggest that CEOs earn greater compensation when governance structures are less effective. We also find that the predicted component of compensation arising from these characteristics of board and ownership structure has a statistically significant negative relation with subsequent firm operating and stock return performance. Overall, our results suggest that firms with weaker governance structures have greater agency problems; that CEOs at firms with greater agency problems receive greater compensation; and that firms with greater agency problems perform worse.

Journal

Journal of Financial EconomicsElsevier

Published: Mar 1, 1999

References

  • Detecting long-run abnormal stock returns
    Barber, B.M.; Lyon, J.D.
  • Board control and CEO compensation
    Boyd, B.K.
  • Annual bonus schemes and the manipulation of earnings
    Holthausen, R.; Larcker, D.; Sloan, R.
  • Measuring long-horizon security price performance
    Kothari, S.P.; Warner, J.
  • Executive compensation, ownership, and firm performance
    Mehran, H.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off