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Corporate Downsizing and CEO Compensation

Issues in Corporate Governance and Finance

ISBN: 978-0-7623-1373-0, eISBN: 978-1-84950-461-4

Publication date: 15 August 2007

Abstract

Our study examines CEO compensation for firms that announce layoffs during the 1993–2001 period. We find that overall there is a large increase in CEO equity-based compensation in the year prior to and the year of the downsizing. Our sample of downsizing firms has small improvements in operating performance following the announcement. However, these performance improvements manifest themselves in the low but not the high equity-based compensation firms. We find that the announcement period returns are higher for downsizing firms that are larger, hire a new CEO in the year prior to the downsizing, have higher leverage, and better operating performance.

Citation

Prezas, A.P., Tarimcilar, M. and Vasudevan, G.K. (2007), "Corporate Downsizing and CEO Compensation", Hirschey, M., John, K. and Makhija, A.K. (Ed.) Issues in Corporate Governance and Finance (Advances in Financial Economics, Vol. 12), Emerald Group Publishing Limited, Leeds, pp. 119-136. https://doi.org/10.1016/S1569-3732(07)12006-5

Publisher

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Emerald Group Publishing Limited

Copyright © 2007, Emerald Group Publishing Limited