The Impact of Incentives on the CEO Compensation and Firm Performance

2004 ◽  
Author(s):  
Mahmoud M. Nourayi ◽  
Sudha Krishnan
Keyword(s):  
Firm Performance ◽  
Ceo Compensation ◽  
The Impact

scholarly journals CEO Compensation and Firm Performance: The Role of ESG Transparency

2020 ◽  
Vol 4 (2) ◽  
pp. 278
Author(s):  
Chetna Rath ◽  
Florentina Kurniasari ◽  
Malabika Deo
Keyword(s):  
Firm Performance ◽  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Negative Relationship ◽  
Chief Executive ◽  
Long Run ◽  
Ceo Pay ◽  
Executive Officers ◽  
The Impact

Chief executive officers (CEOs) of environmental, social, and governance (ESG) firms are known to take lesser pay and engage themselves in corporate social responsibility activities to achieve the dual objective of the enhancement of firm’s performance as well as benefit for stakeholders in the long run. This study examines the role of ESG transparency in strengthening the impact of firm performance on total CEO pay in ESG firms. A panel of 67 firms for the period of 2014–2019 has been analyzed using the two-step system GMM model, with NSE Nifty 100 ESG Index as the data sample and ESG scores from Bloomberg database as a proxy for transparency. Findings reveal that environmental and governance disclosure scores have the potential to intensify the negative relationship between firm performance and CEO compensation, while social disclosure scores do not. In addition, various firm-specific, board-specific, and CEO-specific attributes have also been considered controls affecting remuneration. This paper contributes to the literature by exploring the effect of exhibiting ESG transparency and its nexus with CEO pay as well as firm performance.

scholarly journals Hiring the Right CEO: How Does the Type of CEO Industry Experience Affect Firm Performance, Firm Risk-Taking Behavior, and CEO Compensation?

2021 ◽  
Vol 22 (2) ◽  
pp. 828-845
Author(s):  
Candra Chahyadi ◽  
Trang Doan ◽  
Junnatun Naym
Keyword(s):  
Firm Performance ◽  
Risk Taking ◽  
Ceo Compensation ◽  
High Growth ◽  
Firm Risk ◽  
Business Application ◽  
Risk Taking Behavior ◽  
Lead Firm ◽  
The Impact ◽  
Industry Experience

This paper examines how the type of CEOs’ industry experience (whether a CEO has cross-industry or specific-industry experience) on firm performance, firm risk-taking behavior, and their own compensation. We find that CEOs with cross-industry experience tend to relatively lower the firm performance as well as invest less on R&D. On the other hand, CEOs with specific-industry experience lead firm to higher performance and invest more on R&D expenditures until it reaches a certain threshold, especially among high-growth firms. Total compensation paid to the CEO does not seem to be affected by the type of CEO industry experience. This paper contributes to the literature that examines the impact of CEO characteristics on firm outcomes and CEO compensation. One important business application of our paper is that to optimize firm performance, firms should hire CEOs with the length of specific-industry experience not beyond the threshold levels.

Excessive managerial entrenchment, corporate governance, and firm performance

2019 ◽  
Author(s):  
◽  
Christelle Antounian
Keyword(s):  
Firm Performance ◽  
Firm Value ◽  
Ceo Compensation ◽  
Inverse Correlation ◽  
Poor Performance ◽  
Ceo Turnover ◽  
Managerial Entrenchment ◽  
Board Monitoring ◽  
The Difference ◽  
The Impact

This paper investigates the impact of excessive managerial entrenchment on the CEO turnover-performance sensitivity, CEO compensation, and firm value. We measure the degree of managerial entrenchment based on the E-index presented by Bebchuck et al. (2006). Our main focus is on firms’ excess managerial entrenchment, which is calculated by finding the difference between firm’s E-index and its industry median in a given year. Our findings suggest that an increase in excess CEO entrenchment reduces the likelihood of CEO turnover due to poor performance. We also show a positive correlation between excessive entrenchment and CEO compensation as managers gain more power and authority when they are entrenched. On the other hand, excess CEO entrenchment has an inverse correlation with firm value. We propose that excessive managerial entrenchment has a converse impact on board monitoring and firm performance. Also, we suggest that a sound corporate protects the shareholders’ interests as it prevents CEOs from over entrenchment.

The determinants of CEO compensation: new insights from United States

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahmed Bouteska ◽  
Salma Mefteh-Wali
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Ceo Compensation ◽  
Future Research ◽  
Ceo Power ◽  
Content Type ◽  
Managerial Power ◽  
The Us ◽  
Ceo Pay ◽  
The Impact

PurposeThe purpose of this paper is to examine the determinants of CEO compensation for sample of the US firms. It emphasizes the presence of executive compensation persistence and the importance of CEO power besides performance while setting CEO pay.Design/methodology/approachThe empirical analysis is conducted on a large sample of US firms during the period 2006–2016. It is based on the generalized method of moments (GMM) models to assess the impact of numerous factors on CEO compensation.FindingsThe main findings reveal that firm performance proxied by accounting-based proxies, as well as market-based proxies, plays a significant role in explaining variations in levels of executive compensation. Moreover, there is a significant persistence in executive compensation among the US sample firms. The authors also document that poor governance conditions (managerial power hypothesis) lead to high compensation levels offered to CEO.Research limitations/implicationsAt the end, without a doubt, the analysis has some limitations that prompt the authors to consider future research directions. One future research avenue that can help better explain the effect of firm performance on the CEO compensation is to study this issue using an international sample to determine whether country-level characteristics (e.g. creditor rights, shareholder rights and the enforcement climate) can influence this relationship. Furthermore, it can be worthwhile to deepen the analysis of CEO power and its impact on CEO compensation. It will be interesting to emphasize how the CEO power interacts with the other governance characteristics and some CEO attributes as CEO gender.Practical implicationsThe paper's findings have implications for practitioners, policymakers and regulatory authorities. First, the findings inform regulators that performance is not the only determinant of CEO pay level. This may warrant increased firm disclosure of the details of the pay structure. Second, the study offers insights to policymakers and members of boards of directors interested in enhancing the design of executive compensation and internal corporate governance, to better align managerial incentives to shareholder interests. Firms should strengthen the board independence and properly constitute the board committees (compensation, risk, nomination…).Originality/valueThis paper presents a comprehensive overview of the CEO compensation determinants. It supplements the classic pay-for-performance sensitivity predictions with insights gained from the dynamics of wage setting theory and managerial power theory. The authors develop a composite index to measure the CEO power in order to test the impact of CEO attributes on CEO pay. Additionally, it verifies whether the determinants of CEO pay depend on firm age and size.

Essays in corporate finance

2016 ◽  
Author(s):  
◽  
Christine Ferris
Keyword(s):  
Firm Performance ◽  
Ceo Compensation ◽  
Control Variable ◽  
Future Research ◽  
New Classification ◽  
University Of Missouri ◽  
The University ◽  
The Impact ◽  
Shed Light

[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI AT AUTHOR'S REQUEST.] [1] NEW CLASSIFICATIONS FOR CHAIRMEN OF THE BOARD -- I DID IT MY WAY. In this paper I determine whether a new classification of chairmen (former CEOs) should be added to the traditional current CEO and independent categories. I examine the impact the three categories of chairmen have on firm performance and whether CEO compensation differs between the three categories. If firms with chairmen who are former CEOs have significantly different firm performance or CEO compensation than the other two groups, a third category of chairmen (former CEOs) should be used in future research. The findings shed light on the value of having former CEOs control the board, and should influence the results of studies using chairmen as a control variable. I find that chairmen who are former CEOs are significantly different than current CEOs and independent chairman, and should be separated into their own category. Firms with chairmen who are former CEOs have highest firm performance. These firms also pay less in CEO compensation than firms with current CEOs/chairmen but more than firms with independent chairmen. [2] A TEMP IN THE CORNER OFFICE : THE IMPACT OF INTERIM CEOS ON FIRM PERFORMANCE. This paper examines the impact an interim CEO's previous experience and tenure length have on accounting- and market-based firm performance. I also examine the number of significant changes an interim CEO makes to the firm and the impact of those changes. I find that the prior experience an interim CEO has does not have a significant impact on firm performance. Interim CEOs are significantly less likely to make major changes to the firm than their predecessors; however, some of the changes they make have a significant impact on firm performance.

scholarly journals Corporate Governance Mechanism and Firm Performance as Determinants of CEO Compensation: A Panel Data Analysis of Pakistani Listed Companies

2013 ◽  
Vol 8 (4) ◽  
pp. 307-314
Author(s):  
Zahid Irshad Younas ◽  
Bilal Mehmood ◽  
Asal Ilyas ◽  
Haseeb Asif Bajwa
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Panel Data ◽  
Fixed Effects ◽  
Ceo Compensation ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Governance Mechanism ◽  
Board Size ◽  
The Impact

The purpose of this study is to investigate the impact of corporate governance, firm performance on CEO compensation. More specific, firm performance, board size and audit expenditure are linked with CEO compensation. Using panel data for 151 Pakistani firms listed on Karachi Stock Exchange (KSE), fixed effects regression has been performed. The results indicate firm performance is negatively associated with CEO compensation, which hold managerial power theory. While, board size and audit expenditure showed a positive relationship with CEO compensation, which reflects the presence of human capital theory. The results of study are in line with the prior studies done on CEO compensation.

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