CEO remuneration, financial distress and firm life cycle

Bikram Chatterjee, Jing Jia, Mai Nguyen, Grantley Taylor and Lien Duong

Pacific-Basin Finance Journal, 2023, vol. 80, issue C

Abstract: This study investigates the association between CEO remuneration and firms' state of financial distress and whether that relationship varies systematically across firms' life cycle stages. Using a sample of 6508 firm-year observations over the 2004–2021 period, we find that a firm's state of financial distress is negatively related to CEO remuneration. We also find that this relationship holds in the mature and old stages of a firm life cycle, but not in the young phase. Our findings are consistent with the predictions of resource-based and efficient contracting theories, and are robust to endogeneity tests. Overall, our results show that CEO remuneration is a significant determinant of corporate financial distress.

Keywords: CEO remuneration; Financial distress; Firm life cycle; Resource-based dependence theory (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001166

DOI: 10.1016/j.pacfin.2023.102050

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