The link between CEO compensation and firm performance: does simultaneity matter?(Author abstract)(Report): An article from: Atlantic Economic Journal
Book Details
Author(s)Matthew S. Lilling
PublisherThomson Gale
ISBN / ASINB000VJB4DM
ISBN-13978B000VJB4D8
AvailabilityAvailable for download now
Sales Rank99,999,999
MarketplaceUnited States 🇺🇸
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This digital document is an article from Atlantic Economic Journal, published by Thomson Gale on March 1, 2006. The length of the article is 7015 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.
From the author: In order to combat the principle-agent problem, directors of public companies use incentive-based contracts to align the interests of CEOs and shareholders. Some studies suggest that these contracts are an inefficient use of resources, and that they do not motivate CEOs to do what is best for the firm. In this study, the author estimates a regression to find the relationship between CEO Compensation and market value of a firm. In order to address persistence, endogeneity and firm-specific effects the author uses the first-differenced and system, GMM regression techniques first used by [Arellano, M.; Borer, O. "Another Look at the Instrumental-Variable Estimation of Error-Component Models," Journal of Econometrics, 68, 1995, pp. 29-51] and [Blundell, R. W.; Bonds, S. R. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Journal of Econometrics, 87, 1998, pp. 115-43; Blundell, R. W.; Bond, S. R., Windmeijer, F. "Estimation in Dynamic Panel Data Models: Improving on the Performance of the Standard GMM Estimators," Institute for Fiscal Studies Working Paper W00/12, London, England, 2000]. These regressions report a positive relationship between CEO compensation and market value of a firm. This study concludes that incentive based contracts are effective, due to the positive pay-to-performance link, when controlling for simultaneity. (JEL J3)
Citation Details
Title: The link between CEO compensation and firm performance: does simultaneity matter?(Author abstract)(Report)
Author: Matthew S. Lilling
Publication:Atlantic Economic Journal (Magazine/Journal)
Date: March 1, 2006
Publisher: Thomson Gale
Volume: 34 Issue: 1 Page: 101(14)
Article Type: Report, Author abstract
Distributed by Thomson Gale
From the author: In order to combat the principle-agent problem, directors of public companies use incentive-based contracts to align the interests of CEOs and shareholders. Some studies suggest that these contracts are an inefficient use of resources, and that they do not motivate CEOs to do what is best for the firm. In this study, the author estimates a regression to find the relationship between CEO Compensation and market value of a firm. In order to address persistence, endogeneity and firm-specific effects the author uses the first-differenced and system, GMM regression techniques first used by [Arellano, M.; Borer, O. "Another Look at the Instrumental-Variable Estimation of Error-Component Models," Journal of Econometrics, 68, 1995, pp. 29-51] and [Blundell, R. W.; Bonds, S. R. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Journal of Econometrics, 87, 1998, pp. 115-43; Blundell, R. W.; Bond, S. R., Windmeijer, F. "Estimation in Dynamic Panel Data Models: Improving on the Performance of the Standard GMM Estimators," Institute for Fiscal Studies Working Paper W00/12, London, England, 2000]. These regressions report a positive relationship between CEO compensation and market value of a firm. This study concludes that incentive based contracts are effective, due to the positive pay-to-performance link, when controlling for simultaneity. (JEL J3)
Citation Details
Title: The link between CEO compensation and firm performance: does simultaneity matter?(Author abstract)(Report)
Author: Matthew S. Lilling
Publication:Atlantic Economic Journal (Magazine/Journal)
Date: March 1, 2006
Publisher: Thomson Gale
Volume: 34 Issue: 1 Page: 101(14)
Article Type: Report, Author abstract
Distributed by Thomson Gale
