Effect of executive compensation on firm performance

The paper finds evidence that the equity-based CEO pay is positively related to firm performance and risk-taking. Both stock price and operating performance as well as firm's riskiness increase in the pay-performance sensitivities (PPS) provided by CEO stock options and stock holdings. PPS can explain stock returns better as an additional factor to the Fama-French 3-factor model. When CEOs are compensated with higher PPS, firms experience higher return on asset (ROA). The higher PPS also leads to the higher risk-taking. While CEO incentive compensation has been perceived mixed on its effectiveness, this study provides support to the equity-based CEO compensation in reducing agency conflicts between CEOs and shareholders.

Name thesis:degree_name

M.Sc. Management

Level thesis:degree_level

Masters

Discipline thesis:degree_discipline

Faculty of Business

Department dc:contributor.department

Faculty of Business Programs

Grantor

Brock University

Year dc:date.issued

2015

Author dc:creator

• Abedin, Mohammad Yameenul

• CEO compensation
• pay-for-performance
• Fama-French 3-factor model
• risk taking
• pay-volatility sensitivity

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/10464/6368

OAI identifier oai:identifier

oai:brocku.scholaris.ca:10464/6368