The Effect of Compensation Design and Corporate Governance on the Transparency of CEO Compensation Disclosures
UTS School of Accounting Working Paper No. 45
40 Pages Posted: 22 Jun 2001
Date Written: May 2001
Abstract
We investigate the "transparency" (i.e., the level of detail) of CEO compensation disclosures by Australian firms following regulatory changes in July 1998. After controlling for other possible economic determinants of disclosure, we find that transparency is negatively related to the level of size-adjusted compensation. We also find that transparency increases with firm size and (weakly) with performance. There is also evidence of a "persuasion effect", in that disclosures made after the release of regulatory "guidelines" are more transparent. However, we find no evidence of specific corporate governance attributes (i.e., separation of the CEO and chair roles, auditor quality, board composition, the existence and structure of board committees) being associated with more transparent disclosures. Nor do we find any evidence of transparency being associated with the mix of cash and stock-based compensation. Although there is some indirect evidence of a negative relation between blockholder ownership and disclosure transparency, we find no significant relation with insider ownership. Overall, our results are consistent with corporate governance mechanisms having minimal impact on disclosure where there are potential conflicts of interest between the CEO and outside shareholders.
Keywords: Corporate governance, Disclosure, Compensation
JEL Classification: G32, G12
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems
-
Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature
-
Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature
-
Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature
-
CEO Involvement in the Selection of New Board Members: An Empirical Analysis
By David Yermack and Anil Shivdasani
-
The Uncertain Relationship between Board Composition and Firm Performance
By Sanjai Bhagat and Bernard S. Black
-
The Non-Correlation between Board Independence and Long-Term Firm Performance
By Sanjai Bhagat and Bernard S. Black
-
The Non-Correlation between Board Independence And Long-Term Firm Performance
By Sanjai Bhagat and Bernard S. Black