Institutional ownership and CEO compensation: A longitudinal examination

Research output: Contribution to journalArticle

78 Scopus citations

Abstract

Limited research has looked at how the aspects of institutional ownership affect executive compensation. Using an agency theory approach, we investigate how institutional ownership concentration and dispersion affect levels of CEO compensation, pay mix, and stock option pay sensitivity. We find that the largest owner's concentration is associated with lower levels of compensation, as well as with higher ratios of salary to total compensation and lower ratios of options to total compensation, but that the number of blockholders does not predict any aspects of CEO compensation. In addition, institutional ownership dispersion is associated with increased levels of compensation and greater use of incentive compensation. Finally, higher levels of CEO ownership lead to a significant reduction in the level of options compensation, as well as higher ratios of salary to total compensation and lower ratios of options to total compensation.

Original languageEnglish (US)
Pages (from-to)1078-1088
Number of pages11
JournalJournal of Business Research
Volume58
Issue number8
DOIs
StatePublished - Aug 1 2005

Keywords

  • Corporate governance
  • Executive compensation
  • Institutional ownership

ASJC Scopus subject areas

  • Marketing

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