CEO Pay For Long-Run Performance: A Dynamic View

Ahn, Ji Young

doi:10.19030/jabr.v31i1.9010

Cited by 4 publications

(7 citation statements)

References 39 publications

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“…The key idea behind the dynamic long-run relationship of CEO pay to firm performance is straightforward. In a dynamic agency model, CEO compensation can be characterized as the sum of a fixed level of compensation plus the compensation associated with current and past performance (Boschen & Smith, 1995;Wang, 1997;Ahn, 2015). That is, the firm provides the CEO an incentive composed of current performance-based pay and a series of future expected compensations based on a history of firm's past performance.…”

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

“…In practice, top executives are indeed involved in multi-year long-term relationships with their firms, and one should examine the dynamic relationship between compensation and performance to find the complete pay-performance relationship (Boschen and Smith, 1995). In this setting, Ahn (2015) empirically show that realized future CEO pay levels should be affected by current and future performance.…”

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

“…The sample construction is almost identical with Ahn (2015) except the fact that we included corporate governance measures from IRRC. The governance measure, Gompers G is obtained from the Investor Responsibility Research Center (IRRC) that publishes listings of corporate provisions for individual firms in Corporate Takeover Defenses (Gompers et al, 2001).…”

Section: Samplementioning

confidence: 99%

“…Very few studies have attempted to explore the existence of multi-period dynamic compensation structures. For example, Ahn (2015) empirically presented comprehensive evidence on the existence of a dynamic performance-pay relationship for CEOs. It shows that firms do target a long-run CEO compensation structure that is based on both current and past firm performance.…”

Section: Introductionmentioning

confidence: 99%

“…It shows that firms do target a long-run CEO compensation structure that is based on both current and past firm performance. In addition, the typical firm converges toward its long-run target compensation profiles at a rate of nearly 100% in a year, indicating that firms take steps to offset deviation from their optimal CEO pay (Ahn, 2015).…”

Section: Introductionmentioning

confidence: 99%

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Top Executives’ Pay For Long-Run Performance And Corporate Governance

Ahn

2016

JABR

Self Cite

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This study examines the possibility that the quality of corporate governance has effects on the dynamic relationship between CEO compensation and firm performance. Building on the dynamic view of CEO pay and firm performance and corporate governance literature, we find that firms with weak corporate governance are more likely to provide high powered long-run incentives to CEOs, indicating CEO incentive contracts can be replaced by the role of external corporate control when the external control mechanism is not functioning effectively from the optimal contracting view. Overall, the findings imply that firm’s governance mechanism can generate cross-sectional variations in CEO long-term incentive contracts.

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Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

Section: Samplementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Top Executives’ Pay For Long-Run Performance And Corporate Governance

Ahn

2016

JABR

Self Cite

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Which came first, CEO compensation or firm performance? The causality dilemma in European companies

Smirnova

Zavertiaeva

2017

Research in International Business and Finance

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Executive remuneration determinants: New evidence from meta-analysis

Blanes

Barberá

Porcuna

2019

Economic Research-Ekonomska Istraživanja

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This meta-analysis takes stock of 121 C.E.O. pay studies published between 1998 and 2018 with the objective of identifying the main drivers of C.E.O. pay from a global perspective and contributing to the agency vs managerial debate on this ground. The meta-results disclose a positive C.E.O. pay-performance correlation (the highest correlation coefficient corresponds to Earnings per share with a 34%) as the agency theory prescribes and the governance policies promote. However, firm size still predominates as the main driver of C.E.O. pay (correlation coefficient is around 44%) according to managerial premises. Moreover, our results reconcile both approaches because results of the meta-regressions suggest that larger companies and more independent boards strengthen the pay-performance association. Additional analyses of moderating factors on C.E.O. pay forces do not provide robust conclusions, though, they suggest: (1) weak impact, if any, of both the Cadbury Report and the S.O.X.; and (2) lack of homogeneity in the banking industry despite its specific regulation. ARTICLE HISTORY

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CEO Pay For Long-Run Performance: A Dynamic View

Abstract: ABSTRACT

Cited by 4 publications

References 39 publications

Top Executives’ Pay For Long-Run Performance And Corporate Governance

Top Executives’ Pay For Long-Run Performance And Corporate Governance

Which came first, CEO compensation or firm performance? The causality dilemma in European companies

Executive remuneration determinants: New evidence from meta-analysis

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