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Dynamics influences of Tobin’s Q and CEO compensation on US stocks

Author

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  • Matiur Rahman
  • Muhammad Mustafa

Abstract

Purpose - This paper aims to empirically explore the influences of Tobin’s Q and CEO compensation of 249 US companies on their stock returns. Design/methodology/approach - Heterogeneous panel data for these companies over 2004-2012 are used invoking panel cointegration techniques. Findings - Panel unit root tests and Pedroni cointegration tests confirm nonstationarity of each variable and cointegration among the above three variables. The panel vector error-correction model (VECM) estimates reveal long-run convergence with tepid adjustment. The short-run net interactive feedback effects are positive. The panel generalized method of moments estimates lend further support to the panel VECM inferences. Originality/value - The topic is unique and the existing literature on this topic is scant. Relatively new econometric techniques have been applied for estimation using panel data. The results are quite insightful, in the authors’ view.

Suggested Citation

  • Matiur Rahman & Muhammad Mustafa, 2018. "Dynamics influences of Tobin’s Q and CEO compensation on US stocks," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 10(1), pages 2-16, April.
    • Handle: RePEc:eme:jfeppp:jfep-03-2017-0017
    DOI: 10.1108/JFEP-03-2017-0017
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    Citations

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    Cited by:

    1. V. Veeravel & E. K. S. Sadharma & Bandi Kamaiah, 2024. "Do ESG disclosures lead to superior firm performance? A method of moments panel quantile regression approach," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 741-754, January.

    More about this item

    Keywords

    Econometrics; CEO compensation; VECM; Financial economics; Tobin’s Q; Stock performance; Panel cointegration; Panel GMM; G20; G29;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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