Directors' Pay and Turnover: An Application to a Sample of Large UK Firms
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
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Volume (Year): 60 (1998)
Issue (Month): 4 (November)
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