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CEO compensation, firm performance and operational characteristics

CEO compensation, firm performance and operational characteristics Purpose – This paper aims to examine the impact on executive compensation (both cash and in total) of regulation, size of sales and number of employees, and nature of the business in terms of new‐economy vs traditional. Design/methodology/approach – This study uses the ExecuComp database as the information source. Regression analysis is used to test hypotheses that focus on firm size in terms of sales, market and accounting returns, and the number of firm employees. The sample consists of 455 US firms from 25 industries, and covers the period 1996‐2002. Findings – Firm size and market‐based return are the most significant explanatory variables in affecting executive compensation. More limited support was found for accounting‐based returns, as was changes in the number of employees. Research limitations/implications – Findings of this study may be limited by the temporal context. Around the turn of this century may have been an unusual time in America's corporate history. The economic outlook of the late 1990s may be fundamentally different from the one facing firms now or in the future. Consequently, future research will be needed to determine to what extent these results can be generalized to periods of different economic prospects. Originality/value – This study examines the impact of firms' operational characteristic on Chief Executive Officer (CEO) compensation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

CEO compensation, firm performance and operational characteristics

Mahmoud M. Nourayi; Frank P. Daroca
Managerial Finance , Volume 34 (8): 23 – Jul 4, 2008
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23 pages

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
0307-4358
DOI
10.1108/03074350810874082
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper aims to examine the impact on executive compensation (both cash and in total) of regulation, size of sales and number of employees, and nature of the business in terms of new‐economy vs traditional. Design/methodology/approach – This study uses the ExecuComp database as the information source. Regression analysis is used to test hypotheses that focus on firm size in terms of sales, market and accounting returns, and the number of firm employees. The sample consists of 455 US firms from 25 industries, and covers the period 1996‐2002. Findings – Firm size and market‐based return are the most significant explanatory variables in affecting executive compensation. More limited support was found for accounting‐based returns, as was changes in the number of employees. Research limitations/implications – Findings of this study may be limited by the temporal context. Around the turn of this century may have been an unusual time in America's corporate history. The economic outlook of the late 1990s may be fundamentally different from the one facing firms now or in the future. Consequently, future research will be needed to determine to what extent these results can be generalized to periods of different economic prospects. Originality/value – This study examines the impact of firms' operational characteristic on Chief Executive Officer (CEO) compensation.

Journal

Managerial Finance – Emerald Publishing

Published: Jul 4, 2008

Keywords: Chief executives; Compensation; Performance measures

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