Monitoring Versus Bonding: Shareholder Rights and Management Compensation
AbstractUsing a sample of nearly 700 firms, we documented a significant level of substitution between monitoring efforts by shareholders and bonding of Chief Executive Officers' (CEO)compensation with shareholder wealth. Direct shareholder monitoring effectiveness is measured by various dimensions of voting rights, e.g., equal voting, cumulative voting, and confidential voting. Indirect monitoring is measured by the degree of independence of the board of directors. Bonding of CEO compensation with shareholder wealth is gauged by a new pay-performance sensitivity measure that incorporates volatility in firm value. The results are consistent with prediction of agency theory that compensation contracts are designed to reduce the owner-manager conflict.
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Bibliographic InfoArticle provided by Financial Management Association in its journal Financial Management.
Volume (Year): 24 (1995)
Issue (Month): 3 (Fall)
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Postal: University of South Florida 4202 E. Fowler Ave. COBA #3331 Tampa, FL 33620
Web page: http://www.fma.org/
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- Nigel Driffield & Sarmistha Pal, 2007. "How Does Ownership Structure Affect Capital Structure and Firm Value? Recent Evidence from East Asia," CEDI Discussion Paper Series 07-04, Centre for Economic Development and Institutions(CEDI), Brunel University.
- Munisi, Gibson & Randøy, Trond, 2013. "Corporate governance and company performance across Sub-Saharan African countries," Journal of Economics and Business, Elsevier, vol. 70(C), pages 92-110.
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