CEO and director compensation, CEO turnover and institutional investors: Is there cronyism in the UK?

This paper provides new evidence that correlated abnormal compensation of CEOs and directors is symptomatic of agency problems associated with cronyism. We find that director abnormal compensation has a negative impact on the likelihood of CEO turnover and reduces the sensitivity of CEO turnover to poor stock performance. However, for firms with greater institutional ownership the adverse effects of director abnormal compensation are mitigated, and the negative impact of abnormal compensation on firm performance is reduced. These findings suggest that correlated abnormal compensation of CEOs and directors is likely associated with agency problems.

• Publication year

  2019

• Venue

  Journal of Banking & Finance

• Publication date

  2019-06-01

• Fields of study

  Business, Economics

• Identifiers
  DOI 10.1016/J.JBANKFIN.2019.03.019
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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