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Moderators of the Relationship Between Director Stock-Based Compensation and Firm Performance

Author

Listed:
  • James J. Cordeiro
  • Rajaram Veliyath

    (Coles College of Business, Kennesaw State University and Corporate Governance Center at Kennesaw State)

  • Jane B. Romal

    (SUNY Brockport)

Abstract

Research on the efficacy of stock-based compensation for outside directors has documented a weak or non-existent relationship with firm performance. Other variables also influence the relationships between these two constructs. Consistent with agency theory, we show, for a sample of 450 Standard & Poor 500 firms over the 1995-97 period that the use of director stock options and grants ratios was more strongly associated with positive performance in firms with (a) higher investment opportunities, and (b) weaker external monitoring. These findings have implications for compensation committees in the structuring of director compensation. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

Suggested Citation

  • James J. Cordeiro & Rajaram Veliyath & Jane B. Romal, 2007. "Moderators of the Relationship Between Director Stock-Based Compensation and Firm Performance," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1384-1393, November.
  • Handle: RePEc:bla:corgov:v:15:y:2007:i:6:p:1384-1393
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    References listed on IDEAS

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    1. repec:bla:stratm:v:38:y:2017:i:13:p:2623-2646 is not listed on IDEAS
    2. Min Zhang & Lijun Ma & Jun Su & Wen Zhang, 2014. "Do Suppliers Applaud Corporate Social Performance?," Journal of Business Ethics, Springer, vol. 121(4), pages 543-557, June.
    3. Paige Fields, L. & Fraser, Donald R. & Subrahmanyam, Avanidhar, 2012. "Board quality and the cost of debt capital: The case of bank loans," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1536-1547.

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