Executive Compensation Structure, Ownership and Firm Performance

Posted: 20 Dec 1998

Date Written: August 1994

Abstract

An examination of the executive compensation structure of 153 randomly-selected manufacturing firms in 1979-1980 provides evidence supporting advocates of incentive compensation, and also suggests that the form rather than the level of compensation is what motivates managers to increase firm value Firm performance is positively related to the percentage of equity held by managers and to the percentage of their compensation that is equity-based. Moreover, equity-based compensation is used more extensively in forms with more outside directors. Finally, firms in which a higher percentage of the shares are held by insiders or outside blockholders use less equity-based compensation.

JEL Classification: G32, J33, L22

Suggested Citation

Mehran, Hamid, Executive Compensation Structure, Ownership and Firm Performance (August 1994 ). Available at SSRN: https://ssrn.com/abstract=5658

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