CEO Pay, Shareholder Returns, and Accounting Profits

Frederick Guy

International Journal of the Economics of Business, 2000, vol. 7, issue 3, 263-274

Abstract: We assess the impact on CEO pay (including salary, cash bonus, and benefits in kind) of changes in both accounting and shareholder returns in 99 British companies in the years 1972-89. After correcting for heterogeneity biases inherent in the standard specifications of the problem, we find a strong positive relationship between CEO pay and within-company changes in shareholder returns, and no statistically significant relationship between CEO pay and within-company changes in accounting returns. Differences between firms in long-term average profitability do appear to have a substantial effect on CEO pay, while differences between firms in shareholder returns add nothing to the within-firm pay dynamics.These findings call into question the rationale for explicitly share-based incentive schemes.

Keywords: Ceo Pay; Random Coefficients (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/13571510050197186

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