HEADS I WIN, TAILS YOU LOSE: INSTITUTIONAL MONITORING OF EXECUTIVE PAY RIGIDITY
- 주제(기타) Business, Finance
- 설명문(일반) [Choi, Paul Moon Sub] Ewha Womans Univ, Seoul, South Korea; [Chung, Chune Young] Chung Ang Univ, Seoul, South Korea; [Hwang, Ji Hoon] Univ Arizona, Tucson, AZ 85721 USA; [Liu, Chang] Calif State Univ, Long Beach, CA USA
- 등재 SSCI, SCOPUS
- OA유형 Green Published
- 발행기관 WILEY
- 발행년도 2019
- 총서유형 Journal
- URI http://www.dcollection.net/handler/ewha/000000172039
- 본문언어 영어
- Published As https://dx.doi.org/10.1111/jfir.12196
초록/요약
Agency theory argues that pay for performance alleviates the conflict of interest between managers and shareholders. Furthermore, the literature finds that institutional monitoring tends to promote the performance-pay linkage, thus aligning the two parties' incentives. We find that executive compensation rigidity is negatively and significantly associated with firm value. Moreover, ownership by long-term institutional investors reduces the pay rigidity of top managers in underperforming firms, thus decreasing the value-destroying effect of the rigidity. Overall, these results reaffirm the role of institutional monitoring in mitigating managerial rent extraction.
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