The curious case of one-dollar CEO salaries: evidence from market reaction to salary decision announcements

Anna Danielova and Wei-Ju Liao

International Journal of Managerial Finance, 2024, vol. 21, issue 3, 667-692

Abstract: Purpose - This study investigates the motivations for and compensation structure changes behind $1 CEO salary decisions. Design/methodology/approach - Using a hand-collected sample, we relied on an event study framework and regression analysis to decipher the informational content of $1 CEO salary announcements. Findings - The results show that the market reacts positively to $1 CEO salary announcements that indicate aligning the interests of CEOs and shareholders. Practical implications - A lot of academic and professional attention has been given to the components of executive compensation packages as tools for incentivizing managers. Our findings will help executive board members tasked with determining CEO compensation packages. Originality/value - This study adds to the literature on CEO compensation by deciphering the market reaction to $1 salary decision announcements. Our study contributes to the literature on executive compensation by providing evidence consistent with efficient contracting.

Keywords: Executive compensation; Firm performance; Efficient contracting (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-10-2023-0485

DOI: 10.1108/IJMF-10-2023-0485

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