Business, Management and Accounting
8 years ago

CEO pay tied to performance boosts shareholder value, study finds.

International Journal of Managerial and Financial Accounting
The relationship between CEO performance-based compensation and shareholders value creation: a cross national analysis
Habib Jouber

Paper Summary

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The study looked at how CEO pay tied to company performance affects shareholder value. They analyzed data from 231 companies in four countries to see if these pay incentives align with shareholders' interests. The results showed that performance-based CEO compensation tends to create value for shareholders. However, the impact on long-term shareholder returns varies depending on factors like governance quality, investor protection, and legal systems. In some cases, these incentives work better when property rights are secure and ownership is less restricted.