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Publication date: 23 October 2002

Joohun Kang, Khondkar E. Karim and Robert W. Rutledge

This study examines the effect of several factors causally associated with CEO compensation on firm performance. Previous studies of the association between CEO compensation and…

Abstract

This study examines the effect of several factors causally associated with CEO compensation on firm performance. Previous studies of the association between CEO compensation and firm performance lacked sufficient use of control variables in the examination of this association. This study used a comprehensive measure of firm performance (the relative excess value ratio) that has not previously been used in this context. The results indicate that: (i) short-term CEO compensation has a stronger positive association with firm performance (as measured by the relative excess value ratio) than Long-term CEO compensation; (ii) market-based longterm CEO compensation has a stronger positive association with firm performance than accounting-based long-term CEO compensation; and (iii) CEO stock options are more positively related to the firm performance than restricted stock CEO compensation.

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Research in Finance
Type: Book
ISBN: 978-0-76230-965-8

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