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CEO incentives in European energy utilities: evidence from regulated versus unregulated firms

Author

Listed:
  • Carlo Cambini

    (Politecnico di Torino
    IEFE-Bocconi University)

  • Sara De Masi

    (University of Florence
    Kent State University)

  • Laura Rondi

    (Politecnico di Torino
    CERIS-CNR)

Abstract

This paper studies the effect of incentive mechanisms provided by economic regulation and CEO compensation in European energy firms. We investigate the differences in CEO pay-for-performance sensitivity across regulated and unregulated firms on CEO monetary incentives. Using various measures of firm performance, we find that CEO pay-for-performance sensitivity is lower in regulated companies. These results hold when we control for national corporate governance variables (investor protection, legal origin, disclosure requirements and contract enforcement). Our findings suggest that incentive compensation is a weaker incentive mechanism for firms operating in regulated and less-competitive markets.

Suggested Citation

  • Carlo Cambini & Sara De Masi & Laura Rondi, 2016. "CEO incentives in European energy utilities: evidence from regulated versus unregulated firms," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 43(2), pages 127-155, June.
    • Handle: RePEc:spr:epolin:v:43:y:2016:i:2:d:10.1007_s40812-016-0028-7
    DOI: 10.1007/s40812-016-0028-7
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    More about this item

    Keywords

    Corporate governance; CEO compensation; Pay-for-performance sensitivity; Regulation; European energy utilities;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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