Journal article
Compensation committees, CEO pay and firm performance
Pacific-Basin Finance Journal, Vol.57, pp.1-17
2019
Abstract
We examine whether compensation committee existence (CCX) and compensation committee effectiveness (CCE) are associated with CEO pay-performance alignment, using data drawn from a sample of Australian listed companies. We find that compensation committee existence and effectiveness are positively associated with CEO pay-performance alignment. Further, our results show that the relationships hold for the pre- and post-GFC (Global Financial Crisis) periods but not for the crisis period. This evidence supports the prospect theory argument that in times of macroeconomic crisis, uncontrollable factors external to the firm constitute a firm's reference point for making executive remuneration decisions. These results are robust to alternative measures of firm performance and CEO cash compensation as well as tests of endogeneity. Overall, our evidence suggests that compensation committees contribute to addressing agency problems pertinent to contemporary corporate governance practices.
•We examine the association between remuneration committee existence and effectiveness with CEO pay-performance alignment.•We find remuneration committee existence and effectiveness are positively associated with CEO pay-performance alignment.•We explore whether the results vary by three macro-economic periods, pre-GFC, GFC and post-GFC.•Results hold only for the pre-and post-GFC periods but not for the crisis period.
Details
- Title
- Compensation committees, CEO pay and firm performance
- Authors
- Sutharson Kanapathippillai (Corresponding Author) - Deakin UniversityFerdinand Gul (Author) - Deakin UniversityDessalegn Mihret (Author) - RMIT UniversityMohammad Badrul Muttakin (Author) - Deakin University
- Publication details
- Pacific-Basin Finance Journal, Vol.57, pp.1-17
- Publisher
- Elsevier BV
- DOI
- 10.1016/j.pacfin.2019.101187
- ISSN
- 1879-0585
- Organisation Unit
- University of the Sunshine Coast, Queensland; School of Business and Creative Industries
- Language
- English
- Record Identifier
- 99679192002621
- Output Type
- Journal article
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- Web Of Science research areas
- Business, Finance
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