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CEO remuneration, financial distress and firm life cycle

Author

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  • Chatterjee, Bikram
  • Jia, Jing
  • Nguyen, Mai
  • Taylor, Grantley
  • Duong, Lien

Abstract

This study investigates the association between CEO remuneration and firms' state of financial distress and whether that relationship varies systematically across firms' life cycle stages. Using a sample of 6508 firm-year observations over the 2004–2021 period, we find that a firm's state of financial distress is negatively related to CEO remuneration. We also find that this relationship holds in the mature and old stages of a firm life cycle, but not in the young phase. Our findings are consistent with the predictions of resource-based and efficient contracting theories, and are robust to endogeneity tests. Overall, our results show that CEO remuneration is a significant determinant of corporate financial distress.

Suggested Citation

  • Chatterjee, Bikram & Jia, Jing & Nguyen, Mai & Taylor, Grantley & Duong, Lien, 2023. "CEO remuneration, financial distress and firm life cycle," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001166
    DOI: 10.1016/j.pacfin.2023.102050
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