The impact of clawback provisions on executive cash compensation

Hanni Liu (), Harrison Liu () and Jennifer Yin ()
Additional contact information
Hanni Liu: Manhattan College
Harrison Liu: The University of Texas at San Antonio
Jennifer Yin: The University of Texas at San Antonio

Review of Quantitative Finance and Accounting, 2023, vol. 61, issue 1, No 2, 35-62

Abstract: Abstract An asymmetric payoff function exists in CEO compensation: the sensitivity between CEO cash compensation and negative stock returns is higher than that to positive stock returns. The underlying rationale for such an asymmetrical relationship is that the difficulty of the ex post settling up of cash compensation prompts boards to reduce compensation when there is bad news. In this paper, we examine firms that adopt clawback provisions and find no evidence of such an asymmetry in these firms. The finding is consistent with the clawback provision’s ex post settling up characteristics. Our paper contributes to the literature by showing that clawback provisions favorably impact the structure of CEO compensation by reducing agency costs related to the ex post settling up problem.

Keywords: Clawback; Ex post settling up; Performance measures; Executive compensation (search for similar items in EconPapers)
JEL-codes: J3 L2 M41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11156-023-01136-5 Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:rqfnac:v:61:y:2023:i:1:d:10.1007_s11156-023-01136-5

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-023-01136-5

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().