The relationship between firm risk and executive compensation /
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| Other Authors: | , , |
| Format: | Thesis Book |
| Language: | English |
| Published: |
1993.
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| Online Access: | Link to ProQuest copy Link to OAKTrust copy ProQuest, Abstract |
| Abstract: | The purpose of this study was to investigate the relationship between firm risk and Chief Executive Officer (CEO) compensation from an agency theory perspective. The focus of the study is on compensation mix, the manner in which executives are paid. Agency theory provides two primary organizational mechanisms for dealing with the agency costs of the manager/shareholder relationship: 1) monitoring of the manager by stockholders and the board of directors, and 2) the incentive system, which may serve to align the interests of managers with those of shareholders (Jensen, 1983). A compensation system which links pay to outcomes provides incentives to managers but also has the disadvantage of subjecting the manager to greater personal risk than a pay scheme which provides for a constant fee (Shavell, 1979). Prior research has tended to overlook the risk-bearing concerns inherent in agency theory. The central theme of this research is that firm risk is a variable which affects executives' pay level and pay mix. Risk is conceptualized as potential variance in future returns to the firm as operationalized by the systematic and unsystematic components of the CAPM model. In addition, other measures of risk as outlined in Miller and Brimiley (1990) are included in the research design. Data on executive compensation were collected from proxy statements and other public disclosures. Risk data and control variables were compiled from the COMPUSTAT and CRSP data tapes. The sampling frame consisted of the 1,000 largest publicly traded, non-regulated, U.S. firms. The time frame of the study was the ten year period from 1980 to 1989. The primary methodology employed in this project is the pooled time series design as outlined in Dielman (1983). This method explicitly includes consideration of autocorrelation in the time series while allowing for testing hypotheses involving reciprocal causation. Compensation will be operationalized using a modified version of the Antle and Smith (1985) methodology, which involves conversion of each element of the compensation mix to an inflation adjusted present value equivalent. This procedure has the advantage that it allows all elements of the pay mix to be analyzed. |
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| Item Description: | "Major subject: Management." Vita. |
| Physical Description: | ix, 143 leaves : illustrations ; 28 cm |
| Bibliography: | Includes bibliographical references. |