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CEO compensation, family control, and institutional investors in Continental Europe

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  • Croci, Ettore
  • Gonenc, Halit
  • Ozkan, Neslihan
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    Abstract

    This paper investigates the impact of family control and institutional investors on CEO pay packages in Continental Europe, using a dataset of 754 listed firms with 3731 firm-year observations from 14 countries during 2001–2008. We find that family control curbs the level of CEO total and cash compensation, and the fraction of equity-based compensation. Moreover, we do not observe a significant effect of family control on the excess level of total and cash compensation. This evidence indicates that controlling families do not use CEO compensation to expropriate wealth from minority shareholders. We show that institutional ownership is associated with higher levels of CEO cash and total compensation in Continental Europe, especially in family firms. Also, foreign institutional investors have a positive and significant impact on CEO compensation level. Finally, results indicate that institutional investors affect CEO pay structure: they increase the use of equity-based compensation in both family and non-family firms.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 36 (2012)
    Issue (Month): 12 ()
    Pages: 3318-3335

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    Handle: RePEc:eee:jbfina:v:36:y:2012:i:12:p:3318-3335

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: CEO compensation; Family firms; Institutional investors; Europe;

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    Cited by:
    1. Janto Haman & Hristos Doucouliagos & Michael Graham, 2012. "Agency Problem II and Convergence in CEO Pay," Economics Series 2012_5, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.

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