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...

Recent corporate scandals around the world have led many to single out executive stock options as one of the main culprits. More corporations are abandoning stock options and reverting to restricted stock. This paper argues that such a change is not entirely justifiable. We first provide a...

This paper investigates whether and how social-psychological mechanisms, namely reciprocity, demographic similarity, and similar experiences, affect CEO compensation packages with respect to the levels of total, fixed, and short- and mid-term compensation and the variable proportion of the...

This paper provides new UK evidence on the relationship between managerialincentives and firm risk using a hand-collected database of 3307 executive yearobservations (698 CEO years and 2609 other executive years). We find that therelation between pay performance sensitivity and firm risk...

This paper examines the effect of using different option valuation models to calculatethe fair market value of Executive Stock Options (ESOs) granted to executivedirectors of UK firms. Our key objective is to demonstrate empirically that somecompanies will have greater incentive and benefit from...

We value UK executive stock options (ESOs) as American options that areawarded conditional on the probability of the holders achieving some performancecriteria. Unlike the standard Black and Scholes (BS) model, which is universally usedboth in the literature and practice, this provides a more...

There is a debate on whether executive pay reflects rent extraction due to “managerialpower” or is the result of arms-length bargaining in a principal-agent framework. In this paperwe offer a test of the managerial power hypothesis by empirically examining the CEOcompensation of U.S. public...

We study changes in the design of CEO contracts when firms transition from being public with dispersedshareholders to having strong principals in the form of private equity sponsors. These principals redesignsome, but far from all, contract characteristics. There is no evidence that they reduce...

This paper proposes to exploit a reform in legal rules of corporate governance to identify contractual incentives from the correlation of executive pay and firm performance. In particular, we refer to a major shift in the legal and institutional environment, the reform of the German joint-stock...

This paper provides evidence on how executive compensation relates to firm performance in listed firms in China. Using comprehensive financial and accounting data on China's listed firms from 1998 to 2002, augmented by unique data on executive compensation and ownership structure, we find for...