This study contributes to the agency and corporate governance literature by investigating the relationship between one form of bonding (i.e. aligning the interests of CEOs and shareholders by contract) and a set of firm characteristics that indicate monitoring effectiveness (i.e. board...

Using a sample of nearly 700 firms, we documented a significant level of substitution between monitoring efforts by shareholders and bonding of Chief Executive Officers' (CEO)compensation with shareholder wealth. Direct shareholder monitoring effectiveness is measured by various dimensions of...

Linking executive compensation to stock price performance is predicted to decrease the usual positive price response to dividend increases for two reasons. One, increasing pay-performance sensitivity (PPS) exacerbates managers' optimistic bias regarding future firm performance, reducing the...