Does the CEO's Payment Increase Shareholder Return in S&P 500 Companies?

Collins C Ngwakwe
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Collins C Ngwakwe: University of Limpopo, Polokwane, South Africa

Oblik i finansi, 2022, issue 4, 32-36

Abstract: CEO compensation remains at the forefront of corporate financial discourse - primarily because of its interconnection with firm performance, growth and survivability. Diverse literature exists on CEO compensation and shareholder return, albeit with different findings and/or disagreements. This paper aims to apply a single independent variable enquiry - the CEO total payment to understand how it might influence shareholder return. Research employs a quantitative approach by using a simple OLS technique with data drawn from a random sample of fifty-six companies listed in the S&P 500 Index. The S&P 500 is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. The OLS result yields a P-value of 0.0001, with a negative regression coefficient, which thus indicates a significant negative relationship between the CEO total payment and shareholder return. The result corroborates some extant research regarding the inability of agency theory to provide an overriding explanation for the CEO pay and return relationship. Further research is therefore encouraged to apply more variables, particularly those that may capture CEO's opportunistic behaviour in future CEO and stock return analysis.

Keywords: CEO compensation; stock return; agency theory; firm performance; companies of S&P 500 Index (search for similar items in EconPapers)
JEL-codes: G32 G35 M41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:iaf:journl:y:2022:i:4:p:32-36

DOI: 10.33146/2307-9878-2022-4(98)-32-36

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