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Managerial Power, Stock-Based Compensation, and Firm Performance: Theory and Evidence

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Author Info
Choe, Chongwoo
Tian, Gloria
Yin, Xiangkang

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Abstract

We study theoretically and empirically the relation among CEO power, CEO pay and firm performance. Our theoretical model follows the rent extraction view of CEO compensation put forward by the managerial power theory. We test our theoretical findings using the sample of S&P1500 firms. The predicted relation between power and pay is largely supported. However, the relation between power and firm performance has mixed support, suggesting that, while the managerial power theory has relevance in explaining the relation between power and pay, the scope of power needs to be broadened for better understanding of how managerial power affects firm performance.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13449.

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Date of creation: Feb 2009
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Handle: RePEc:pra:mprapa:13449

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Related research
Keywords: Managerial power; agency theory; stock-based compensation; firm performance; pay-performance sensitivity.;

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G30 - Financial Economics - - Corporate Finance and Governance - - - General
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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