Effect of the Sarbanes–Oxley act on CEOs’ stock ownership and pay-performance sensitivity

Effect of the Sarbanes–Oxley act on CEOs’ stock ownership and pay-performance sensitivity The main purpose of this paper is to provide evidence on the effect of the Sarbanes–Oxley Act on stock ownership and the various measures of pay-performance sensitivity of CEOs’ wealth. The Sarbanes–Oxley Act (SOX) provides a natural experiment for examining how stock ownership and executive pay structure adapt to a change in regulatory environment. Using annual compensation data of S&P 1,500 firms in 1994–2005, we examine the impact of SOX on stock ownership and pay-performance sensitivity of CEOs. Consistent with our expectations, we find that in light of SOX: (1) stock ownership and (2) the total pay-performance sensitivity of CEOs have decreased substantially, indicating that SOX induces a weaker incentive alignment between shareholders and CEOs. In contrast, we find that after SOX stock ownership and the total pay-performance sensitivity of CEOs have remained unchanged in the regulated industries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Effect of the Sarbanes–Oxley act on CEOs’ stock ownership and pay-performance sensitivity

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Publisher
Springer US
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-011-0226-3
Publisher site
See Article on Publisher Site

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