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CEO Cash and Stock-Based Compensation Changes, Layoff Decisions, and Shareholder Value

  • Jeffrey T. Brookman
  • Saeyoung Chang
  • Craig G. Rennie
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    The chief executive officers (CEOs) of firms announcing layoffs receive 22.8% more total pay in the subsequent year than other CEOs. The pay increases result almost entirely from increases in stock-based compensation and are found to persist. In addition, layoff announcements are accompanied by shareholder value increases averaging $40 million to $95 million. One-time labor cost savings from layoffs average $65 million. We conclude that CEOs receive pay increases following layoffs as rewards for past decisions and to motivate value-enhancing decisions in the future. Copyright 2007, The Eastern Finance Association.

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    Article provided by Eastern Finance Association in its journal Financial Review.

    Volume (Year): 42 (2007)
    Issue (Month): 1 (02)
    Pages: 99-119

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    Handle: RePEc:bla:finrev:v:42:y:2007:i:1:p:99-119
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