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Directors' Pay and Turnover: An Application to a Sample of Large UK Firms

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  • Conyon, Martin J

Abstract

This paper examines the operation of the U.K. managerial labor market. The author tests the twin agency predictions that directors' pay is positively related to corporate performance and CEO turnover is negatively associated with firm profitability. He finds that the panel data econometric evidence reveals a significant and positive correlation between directors' pay, company performance, and size; the CEO turnover model predicts a negative, and significant, association with predated shareholder returns: the data is consistent with the view that CEO are disciplined by the threat of dismissal; and boardroom governance factors (e.g., proportion of nonexecutives and board size) are only of some importance in the CEO succession process. Copyright 1998 by Blackwell Publishing Ltd

Suggested Citation

  • Conyon, Martin J, 1998. "Directors' Pay and Turnover: An Application to a Sample of Large UK Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(4), pages 485-507, November.
  • Handle: RePEc:bla:obuest:v:60:y:1998:i:4:p:485-507
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    Cited by:

    1. M. Martin Boyer & Hernán Ortiz-Molina, 2008. "Career Concerns of Top Executives, Managerial Ownership and CEO Succession," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(3), pages 178-193, May.
    2. Fabbri, Francesca & Marin, Dalia, 2012. "What explains the rise in CEO pay in Germany? A Panel Data Analysis for 1977-2009," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 374, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Powers, Eric A., 2005. "Interpreting logit regressions with interaction terms: an application to the management turnover literature," Journal of Corporate Finance, Elsevier, vol. 11(3), pages 504-522, June.
    4. Chin-Tsai Lin & Yi-Hsien Wang, 2005. "An Analysis of Political Changes on Nikkei 225 Stock Returns and Volatilities," Annals of Economics and Finance, Society for AEF, vol. 6(1), pages 169-183, May.
    5. Yi-Hsien Wang & Chung-Chu Chuang, 2009. "Selecting the portfolio investment strategy under political structure change in United States," Quality & Quantity: International Journal of Methodology, Springer, vol. 43(5), pages 845-854, September.
    6. Paul André, 2009. ""Discussion of" Firm Performance and Managerial Succession in Family Managed Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(3-4), pages 485-495.
    7. Swarnodeep HomRoy, 2016. "Was Adam Smith Right? Evidence of Compensating Differential in CEO Pay," Manchester School, University of Manchester, vol. 84(1), pages 1-24, January.
    8. Hristos Doucouliagos & Janto Haman & Saeed Askary, 2007. "Directors' Remuneration and Performance in Australian Banking," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1363-1383, November.
    9. Carles Gispert, 1998. "Board turnover and firm performance in Spanish companies," Investigaciones Economicas, Fundación SEPI, vol. 22(3), pages 517-536, September.
    10. Illoong Kwon, 2005. "Threat of Dismissal: Incentive or Sorting?," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 797-838, October.
    11. Miljkovic, Dragan, 2006. "Organizational portfolio theory and international not-for-profit organizations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(1), pages 142-150, February.
    12. Christian Bayer & Carsten Burhop, 2005. "If only I could sack you! Management turnover and performance in large German Banks between 1874 and 1913," Economic History 0502006, EconWPA.
    13. Rafel Crespi-Cladera & Carles Gispert & Luc Renneboog, 2001. "Verringern Management-Entlohnungskosten die Agency-Kosten?: Empirische Evidenz von netzwerkorientierten und marktorientierten Unternehmenskontrollsystemen," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(2), pages 234-246.
    14. Ian Gregory-Smith & Brian G. M. Main, 2016. "Testing the Participation Constraint in the Executive Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(4), pages 399-426, September.
    15. Gili Yen & Ching-Lung Chen, 2005. "Proxy contest, board reelection, and managerial turnover-yes, the proxy contest outcome matters," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 15-23.
    16. Muravyev, Alexander, 2003. "Обновление Директорского Корпуса На Российских Приватизированных Предприятиях
      [Turnover of managers in Russian privatized enterprises: A survey of evidence]
      ," MPRA Paper 27230, University Library of Munich, Germany.
    17. Chin-Tsai Lin & Yi-Hsien Wang, 2007. "The impact of party alternative on the stock market: the case of Japan," Applied Economics, Taylor & Francis Journals, vol. 39(1), pages 79-85.

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