CEO target compensation and performance standards in privately- and publicly-held firms through a disclosure regulation change

In this paper, the authors investigate whether CEOs from publicly-traded firms have higher target bonuses, higher target total cash compensation and smoother abnormal bonuses than CEOs in private firms. The authors also analyse the impact of disclosure regulation on performance standards that boards set for CEOs of both publicly-traded and private firms. Relying on samples containing both publicly-held and privately-owned firms, the authors show that the advent of mandated disclosure of executive compensation has imposed an additional compensation cost upon the shareholders of publicly-held firms without necessarily leading managers to achieve higher performance standards. The results suggest that executive compensation determination may reflect, beyond agency, managerial power and rent extraction considerations, both institutional (impression management) and governance pressures.