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The alignment effects of CEO stock incentives in the presence of government ownership: International evidence from Gulf Cooperation Council countries

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  • Mahmoud Agha

    (Accounting and Finance, Business School, The University of Western Australia, Crawley, WA, Australia)

  • Baban Eulaiwi

    (Department of Accounting, Curtin Business School, Curtin University, Bentley, WA, Australia)

Abstract

This article investigates whether government ownership in publicly listed firms of Gulf Cooperation Council (GCC) countries affects the behaviour of CEOs who are granted stock incentives, that is, an ownership stake in these firms. The results suggest that government ownership may create an environment that could be abused by these managers. In particular, we find that when government ownership reaches a certain threshold, the alignment effect of CEO stock incentives is reversed such that borrowing increases; capital expenditure decreases; selling, general and administrative (SGA) expenses increase; and firm performance decreases with the level of CEO stock incentives. Our results could have implications for investors and policymakers in GCC countries, and other developing markets, where governments usually have substantial equity stakes in some publicly listed firms. JEL Classification: G32, G34, G35, G38

Suggested Citation

  • Mahmoud Agha & Baban Eulaiwi, 2020. "The alignment effects of CEO stock incentives in the presence of government ownership: International evidence from Gulf Cooperation Council countries," Australian Journal of Management, Australian School of Business, vol. 45(2), pages 195-222, May.
    • Handle: RePEc:sae:ausman:v:45:y:2020:i:2:p:195-222
    DOI: 10.1177/0312896219893730
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    More about this item

    Keywords

    Alignment effects; CEO stock incentives; financial decisions; GCC countries; government ownership;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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