Ownership concentration and sensitivity of executive pay to accounting performance measures: Evidence from publicly and privately-held insurance companies

Ownership concentration and sensitivity of executive pay to accounting performance measures:... We investigate the relation between CEO compensation and accounting performance measures as a function of ownership structure. We use publicly-held property-liability insurers to consider the relation for firms with diffusely-held ownership and use privately-held property-liability insurers to consider the relation for firms with closely-held ownership. We find a significant positive association between return on assets and the level of compensation for publicly-held insurers. Consistent with optimal contracting theory, we find no such relationship for privately-held insurers. Results suggest that within closely-held firms CEO compensation is less based on objective measures like accounting information and more on subjective measures. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Ownership concentration and sensitivity of executive pay to accounting performance measures: Evidence from publicly and privately-held insurance companies

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Publisher
Elsevier
Copyright
Copyright © 1999 Elsevier Science B.V.
ISSN
0165-4101
D.O.I.
10.1016/S0165-4101(99)00021-X
Publisher site
See Article on Publisher Site

Abstract

We investigate the relation between CEO compensation and accounting performance measures as a function of ownership structure. We use publicly-held property-liability insurers to consider the relation for firms with diffusely-held ownership and use privately-held property-liability insurers to consider the relation for firms with closely-held ownership. We find a significant positive association between return on assets and the level of compensation for publicly-held insurers. Consistent with optimal contracting theory, we find no such relationship for privately-held insurers. Results suggest that within closely-held firms CEO compensation is less based on objective measures like accounting information and more on subjective measures.

Journal

Journal of Accounting and EconomicsElsevier

Published: Dec 1, 1999

References

  • Compensation and incentives: Practice vs. theory
    Baker, G.P; Jensen, M.C; Murphy, K.J
  • Annual bonus schemes and the manipulation of earnings
    Holthausen, R; Larcker, D; Sloan, R.G
  • Executive compensation structure, ownership, and firm performance
    Mehran, H
  • Taxation, regulation, and the organizational structure of property–casualty insurers
    Petroni, K.R; Shackelford, D.A

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