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CEO Compensation and Board Structure
Author(s) -
CHHAOCHHARIA VIDHI,
GRINSTEIN YANIV
Publication year - 2009
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2008.01433.x
Subject(s) - unobservable , business , accounting , compensation (psychology) , executive compensation , corporate governance , stock options , on board , stock (firearms) , industrial organization , finance , economics , econometrics , engineering , mechanical engineering , psychology , psychoanalysis , aerospace engineering
In response to corporate scandals in 2001 and 2002, major U.S. stock exchanges issued new board requirements to enhance board oversight. We find a significant decrease in CEO compensation for firms that were more affected by these requirements, compared with firms that were less affected, taking into account unobservable firm effects, time‐varying industry effects, size, and performance. The decrease in compensation is particularly pronounced in the subset of affected firms with no outside blockholder on the board and in affected firms with low concentration of institutional investors. Our results suggest that the new board requirements affected CEO compensation decisions.