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Determinants of Chief Executive Officer Compensation

Author

Listed:
  • Hwei Cheng Wang
  • Chiulien C. Venezia
  • Yung-I Lou

Abstract

This study examines the level and structure of CEO compensation of 2,448 CEO’s from 1,622 firms spanning a range extending from 1997 through 2002. Based on agency and expectancy theories, this study tests the hypotheses that corporate diversification is associated with CEO compensation. The results found that the higher degree of international diversification, higher accounting earning performance, higher investment opportunities, and larger firm size, resulted in CEO’s receiving higher levels of compensation. In contrast, the higher the degree of industrial diversification, the fewer levels of total compensation, long-term compensation, and stock options corporate CEO’s received. In addition, this study finds that both international and industrial diversification is associated with a greater use of current compensation, as well as a greater reliance on accounting-based, rather than stock return earning (market-based measures) of firm performance.

Suggested Citation

  • Hwei Cheng Wang & Chiulien C. Venezia & Yung-I Lou, 2013. "Determinants of Chief Executive Officer Compensation," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 7(4), pages 29-42.
    • Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:4:p:29-42
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    Cited by:

    1. repec:ipg:wpaper:2014-045 is not listed on IDEAS
    2. Chiraz Ben Ali & Frederic Teulon, 2014. "CEO Monitoring and board effectiveness: Resolving CEO compensation issue," Working Papers 2014-45, Department of Research, Ipag Business School.
    3. Farzan Yahya & Zahiruddin B. Ghazali, 2017. "Effectiveness of board governance and dividend policy as alignment mechanisms to firm performance and CEO compensation," Cogent Business & Management, Taylor & Francis Journals, vol. 4(1), pages 1398124-139, January.

    More about this item

    Keywords

    CEO Compensation; Corporate Diversification; International Diversification; Industrial Diversification; Firm Performance; Investment Opportunity; Stock Ownership;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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