Blockholder monitoring and the efficiency of pay-performance benchmarking

Kyonghee Kim

Journal of Corporate Finance, 2010, vol. 16, issue 5, 748-766

Abstract: In this article I examine how the performance sensitivity of CEO compensation is related to the level and turnover of outside block ownership. Separating firm performance into firm-specific (Skill) and exogenous (Luck) components, I find that pay sensitivity to Luck increases with blockholder turnover, whereas pay sensitivity to Skill increases with blockholding size. Furthermore, when blockholder turnover is higher, CEO pay increases more with positive Luck but does not decrease as much with negative Luck; also, excess CEO compensation is larger. Thus, the rent accruing to CEOs via asymmetric pay sensitivity to Luck is partly explained by short investment horizons of large shareholders.

Keywords: Blockholder; monitoring; Investment; horizon; CEO; compensation; Pay; performance; sensitivity; Skill; Luck (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929-1199(10)00062-3
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:16:y:2010:i:5:p:748-766

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().