The Relation between Stakeholder Management, Firm Value, and CEO Compensation: A Test of Enlightened Value Maximization
"Whether firms pursue shareholder value maximization or the maximization of stakeholder welfare is a controversial issue whose outcomes seem irreconcilable. We propose that firms are likely to compensate their executives for pursuing the firm's goal be it shareholder value maximization or the maximization of stakeholder welfare. In this paper, we examine the correlation between firm value, stakeholder management, and compensation. We find that stakeholder management is positively related to firm value. However, firms do not compensate managers for having good relationships with its stakeholders. These results do not support stakeholder theory. We also find an endogenous association between compensation and firm value. Our results are consistent with Jensen's (2001) enlightened value maximization theory. Managers are compensated for achieving the firm's ultimate goal, value maximization. However, managers optimize interaction with stakeholders to accomplish this objective." Copyright (c) 2010 Financial Management Association International..
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 39 (2010)
Issue (Month): 3 (09)
|Contact details of provider:|| Postal: |
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0046-3892
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0046-3892|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brian J. Hall & Jeffrey B. Liebman, 1997.
"Are CEOs Really Paid Like Bureaucrats?,"
NBER Working Papers
6213, National Bureau of Economic Research, Inc.
- Stephen Brammer & Chris Brooks & Stephen Pavelin, 2006.
"Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures,"
Financial Management Association International, vol. 35(3), pages 97-116, 09.
- Stephen Brammer & Chris Brooks & Stephen Pavelin, 2006. "Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures," Financial Management, Financial Management Association, vol. 35(3), Autumn.
- Himmelberg, Charles P. & Hubbard, R. Glenn & Palia, Darius, 1999.
"Understanding the determinants of managerial ownership and the link between ownership and performance,"
Journal of Financial Economics,
Elsevier, vol. 53(3), pages 353-384, September.
- Charles P. Himmelberg & R. Glenn Hubbard & Darius Palia, 2000. "Understanding the Determinants of Managerial Ownership and the Link Between Ownership and Performance," NBER Working Papers 7209, National Bureau of Economic Research, Inc.
- Himmelberg, C.P. & Hubbard, R.G. & Palia, D., 1997. "Understanding the Determinants of Mangerial Ownership and the Link Between Ownership and Performance," Papers 97-21, Columbia - Graduate School of Business.
- Pascual Berrone & Jordi Surroca & Josep TribÃ³, 2007.
"Corporate Ethical Identity as a Determinant of Firm Performance: A Test of the Mediating Role of Stakeholder Satisfaction,"
Journal of Business Ethics,
Springer, vol. 76(1), pages 35-53, November.
- Pascual Berrone & Jordi Surroca & Josep A. Tribo, 2005. "Corporate Ethical Identity As Determinant Of Firm Performance: A Test Of The Mediating Role Of Stakeholder Satisfaction," Business Economics Working Papers wb053108, Universidad Carlos III, Departamento de Economía de la Empresa.
- Karpoff, Jonathan M & Lott, John R, Jr, 1993. "The Reputational Penalty Firms Bear from Committing Criminal Fraud," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 757-802, October.
- John Core, 2002. "Estimating the Value of Employee Stock Option Portfolios and Their Sensitivities to Price and Volatility," Journal of Accounting Research, Wiley Blackwell, vol. 40(3), pages 613-630, 06.
- Michael K. Fung, 2009. "Is Innovativeness a Link between Pay and Performance?," Financial Management, Financial Management Association International, vol. 38(2), pages 411-429, 06.
- McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
- Murphy, Kevin J., 2000. "Performance standards in incentive contracts," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 245-278, December.
- Michael C. Jensen, 2001.
"Value Maximization, Stakeholder Theory, And The Corporate Objective Function,"
Journal of Applied Corporate Finance,
Morgan Stanley, vol. 14(3), pages 8-21.
- Michael Jensen, 2001. "Value Maximisation, Stakeholder Theory, and the Corporate Objective Function," European Financial Management, European Financial Management Association, vol. 7(3), pages 297-317.
- Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42.
- Clifford G. Holderness & Randall S. Kroszner & Dennis P. Sheehan, 1999. "Were the Good Old Days That Good? Changes in Managerial Stock Ownership Since the Great Depression," Journal of Finance, American Finance Association, vol. 54(2), pages 435-469, 04.
- William Rogers, 1993. "Quantile regression standard errors," Stata Technical Bulletin, StataCorp LP, vol. 2(9).
- Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
- Ron Bird & Anthony D. Hall & Francesco MomentÃ¨ & Francesco Reggiani, 2007. "What Corporate Social Responsibility Activities are Valued by the Market?," Journal of Business Ethics, Springer, vol. 76(2), pages 189-206, December.
- Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
- Aaron K. Chatterji & David I. Levine & Michael W. Toffel, 2009. "How Well Do Social Ratings Actually Measure Corporate Social Responsibility?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 125-169, 03.
- McConnell, John J. & Servaes, Henri, 1995. "Equity ownership and the two faces of debt," Journal of Financial Economics, Elsevier, vol. 39(1), pages 131-157, September.
When requesting a correction, please mention this item's handle: RePEc:bla:finmgt:v:39:y:2010:i:3:p:929-964. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.