TY - JOUR
T1 - Ceo compensation, shareholder rights, and corporate governance
T2 - An empirical investigation
AU - Jiraporn, Pornsit
AU - Kim, Young Sang
AU - Davidson, Wallace N.
PY - 2005/1/1
Y1 - 2005/1/1
N2 - We investigate whether CEO compensation is influenced by the strength of shareholder rights. Our evidence reveals that CEOs of firms where shareholder rights are weak obtain more favorable compensation. It is also found that higher CEO pay is associated with a higher degree of potential managerial entrenchment. Additionally, CEOs of firms with governance provisions that offer them protection from takeovers enjoy more generous pay. We also examine the change in CEO compensation relative to the change in shareholders' wealth. The evidence shows that when there is an increase in shareholders' wealth, the CEO is able to obtain higher incremental compensation when shareholder rights are weak. On the contrary, when shareholders' wealth falls, there is no corresponding decline in CEO compensation when shareholder rights are weal Given the empirical evidence, we argue that CEO compensation practices reflect rent expropriation rather than optimal contracting.
AB - We investigate whether CEO compensation is influenced by the strength of shareholder rights. Our evidence reveals that CEOs of firms where shareholder rights are weak obtain more favorable compensation. It is also found that higher CEO pay is associated with a higher degree of potential managerial entrenchment. Additionally, CEOs of firms with governance provisions that offer them protection from takeovers enjoy more generous pay. We also examine the change in CEO compensation relative to the change in shareholders' wealth. The evidence shows that when there is an increase in shareholders' wealth, the CEO is able to obtain higher incremental compensation when shareholder rights are weak. On the contrary, when shareholders' wealth falls, there is no corresponding decline in CEO compensation when shareholder rights are weal Given the empirical evidence, we argue that CEO compensation practices reflect rent expropriation rather than optimal contracting.
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U2 - 10.1007/BF02761556
DO - 10.1007/BF02761556
M3 - Article
AN - SCOPUS:42149133200
SN - 1055-0925
VL - 29
SP - 242
EP - 258
JO - Journal of Economics and Finance
JF - Journal of Economics and Finance
IS - 2
ER -