Managerial Power, Stock-Based Compensation, and Firm Performance: Theory and Evidence

Chongwoo Choe, Gloria Tian and Xiangkang Yin

MPRA Paper from University Library of Munich, Germany

Abstract: We study theoretically and empirically the relation among CEO power, CEO pay and firm performance. Our theoretical model follows the rent extraction view of CEO compensation put forward by the managerial power theory. We test our theoretical findings using the sample of S&P1500 firms. The predicted relation between power and pay is largely supported. However, the relation between power and firm performance has mixed support, suggesting that, while the managerial power theory has relevance in explaining the relation between power and pay, the scope of power needs to be broadened for better understanding of how managerial power affects firm performance.

Keywords: Managerial power; agency theory; stock-based compensation; firm performance; pay-performance sensitivity (search for similar items in EconPapers)
JEL-codes: D82 G30 J33 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-bec, nep-cse and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: MANAGERIAL POWER, STOCK-BASED COMPENSATION, AND FIRM PERFORMANCE: THEORY AND EVIDENCE (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13449

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