Human capital and agency effects on CEO compensation of IPO biopharmaceutical firms and the market’s response

David R. Williams (), Betty S. Coffey () and Carlton C. Young ()
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David R. Williams: Beaver College of Health Sciences, ASU
Betty S. Coffey: Appalachian State University
Carlton C. Young: Mississippi State University

Journal of Management & Governance, 2018, vol. 22, issue 2, No 4, 315-337

Abstract: Abstract This paper examines the determinants of base pay and total incentive compensation packages of CEOs of biopharmaceutical firms that have recently gone public, and whether human capital and agency factors affect the market’s response to the initial public offering. We find that in terms of net proceeds, the IPO market appears to reward the firms that have founder-CEOs and CEOs with higher incentive compensation. CEOs with prior venture capital experience are associated with receiving higher incentive compensation, while CEOs with a greater ownership interest in the firm receive lower incentive compensation but higher salaries. CEOs of firms with a greater percentage of insiders are associated with lower salaries. The results should add to our understanding related to human capital and agency theories, as well as help firms and investors better understand and structure CEO compensation.

Keywords: CEO compensation; Initial public offering; Agency issues; Human capital effects (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10997-017-9389-1

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