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Moderators of the Relationship Between Director Stock-Based Compensation and Firm Performance

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Author Info

  • James J. Cordeiro
  • Rajaram Veliyath

    (Coles College of Business, Kennesaw State University and Corporate Governance Center at Kennesaw State)

  • Jane B. Romal

    (SUNY Brockport)

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    Abstract

    Research on the efficacy of stock-based compensation for outside directors has documented a weak or non-existent relationship with firm performance. Other variables also influence the relationships between these two constructs. Consistent with agency theory, we show, for a sample of 450 Standard & Poor 500 firms over the 1995-97 period that the use of director stock options and grants ratios was more strongly associated with positive performance in firms with (a) higher investment opportunities, and (b) weaker external monitoring. These findings have implications for compensation committees in the structuring of director compensation. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

    Volume (Year): 15 (2007)
    Issue (Month): 6 (November)
    Pages: 1384-1393

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    Handle: RePEc:bla:corgov:v:15:y:2007:i:6:p:1384-1393

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1

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    Cited by:
    1. Paige Fields, L. & Fraser, Donald R. & Subrahmanyam, Avanidhar, 2012. "Board quality and the cost of debt capital: The case of bank loans," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1536-1547.

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