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Full-Text Articles in Corporate Finance
Optimal Ceo Compensation With Search: Theory And Empirical Evidence, Melanie Cao, Rong Wang
Optimal Ceo Compensation With Search: Theory And Empirical Evidence, Melanie Cao, Rong Wang
Research Collection Lee Kong Chian School Of Business
We integrate an agency problem into search theory to study executive compensation in a market equilibrium. A CEO can choose to stay or quit and search after privately observing an idiosyncratic shock to the firm. The market equilibrium endogenizes CEOs’ and firms’ outside options and captures contracting externalities. We show that the optimal pay-to-performance ratio is less than one even when the CEO is risk neutral. Moreover, the equilibrium pay-to-performance sensitivity depends positively on a firm's idiosyncratic risk and negatively on the systematic risk. Our empirical tests using executive compensation data confirm these results.
Family Ownership And Ceo Turnovers, Xia Chen, Qiang Cheng, Zhonglan Dai
Family Ownership And Ceo Turnovers, Xia Chen, Qiang Cheng, Zhonglan Dai
Research Collection School Of Accountancy
This paper investigates the impact of the founding family’s presence on CEO turnover decisions. We find that family firms managed by CEOs outside the founding family (i.e., professional CEO family firms) have higher CEO turnover-performance sensitivity than family firms managed by family members (i.e., family CEO firms) or non-family firms. These results are robust to alternative performance measures and CEO turnover definitions. Additional analyses indicate that higher family ownership leads to even higher (lower) turnover-performance sensitivity in professional CEO family firms (family CEO firms). These results indicate that, with regard to CEO turnover decisions, better monitoring of CEOs by family …