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Market Feedback Effect on CEO Pay: Evidence from Peers’ Say-on-Pay Voting Failures

Author

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  • Cheng, C.S. Agnes
  • Hasan, Iftekhar
  • Tang, Feng
  • Xie, Jing

Abstract

This article shows that when a compensation peer firm experiences a significant failure in its say-on-pay (SOP) voting, the focal firm’s stock price is adversely affected, resulting in reduced CEO pay in the subsequent period. This pay-reduction effect is amplified when the board is more powerful, when proxy advisors express concerns about CEO pay, and when the compensation consultant lacks quality. Directors who react to the price drop and cut the CEO’s pay receive higher votes in future director elections, implying a market feedback effect for directors of the focal firm triggered by their peers’ SOP voting failure.

Suggested Citation

  • Cheng, C.S. Agnes & Hasan, Iftekhar & Tang, Feng & Xie, Jing, 2026. "Market Feedback Effect on CEO Pay: Evidence from Peers’ Say-on-Pay Voting Failures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 61(3), pages 1348-1386, May.
    • Handle: RePEc:cup:jfinqa:v:61:y:2026:i:3:p:1348-1386_10
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