When do pay spreads influence firm value?
- 14 April 2014
- journal article
- research article
- Published by Taylor & Francis Ltd in Applied Financial Economics
- Vol. 24 (11), 723-737
- https://doi.org/10.1080/09603107.2013.851769
Abstract
This article examines whether the effect of hierarchical pay structures on firm value is different between the firms in which the CEO is not the highest paid member of the top management team and those in which the CEO receives the highest pay. We find that the difference in pay between CEO and VPs benefits firm value only when CEO is the highest paid member of the top management team. In firms where the CEO does not receive the highest pay, pay gaps have a negative impact on firm value. The article also finds that financial distress, family ownership, firm size and R&D intensity increase the likelihood of CEO not being the highest paid manager, whereas CEO entrenchment and CEO power along with dividend payout decrease this likelihood.Keywords
This publication has 23 references indexed in Scilit:
- The CEO pay sliceJournal of Financial Economics, 2011
- The Granger-causality between health care expenditure and output: a panel data approachApplied Economics, 2009
- What Matters in Corporate Governance?The Review of Financial Studies, 2008
- Family ownership and productivity: the role of owner-managementJournal of Corporate Finance, 2005
- Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500The Journal of Finance, 2003
- Top management team compensation: the missing link between CEO pay and firm performance?Strategic Management Journal, 2002
- Corporate tournaments and executive compensation: Evidence from the U.K.Strategic Management Journal, 2001
- Executive Compensation and Tournament Theory: Empirical Tests on Danish DataJournal of Labor Economics, 1999
- Contestability and Pay Differential in the Executive SuitesEuropean Financial Management, 1998
- Bankruptcy, boards, banks, and blockholders: Evidence on changes in corporate ownership and control when firms defaultJournal of Financial Economics, 1990