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

Chen, Jie, Goergen, Marc ORCID: https://orcid.org/0000-0003-4391-2651, Leung, Woon Sau ORCID: https://orcid.org/0000-0002-0389-2126 and Song, Wei 2019. CEO and director compensation, CEO turnover and institutional investors: Is there cronyism in the UK? Journal of Banking and Finance 103 , pp. 18-35. 10.1016/j.jbankfin.2019.03.019

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Abstract

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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0378-4266
Date of First Compliant Deposit:	17 April 2019
Date of Acceptance:	27 March 2019
Last Modified:	13 Nov 2024 17:00
URI:	https://orca.cardiff.ac.uk/id/eprint/121269

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