The interaction effects of CEO power, social connections and incentive compensation on firm value

We study the relation between company value and the interplay between CEO power, CEO equity incentives and the friendliness of the board of directors. Following Bebchuk, Cremers and Peyer (2011), we measure CEO power as the proportion paid to the CEO of the total compensation paid to the top five ex...

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Main Authors: CATON, Gary, GOH, Choo Yong, Jeremy, KE, Jinghao, LINN, Scott C.
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Language:English
Published: Institutional Knowledge at Singapore Management University 2015
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/5214
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6213/viewcontent/SSRN_id2594993.pdf
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spelling sg-smu-ink.lkcsb_research-62132017-08-25T01:57:23Z The interaction effects of CEO power, social connections and incentive compensation on firm value CATON, Gary GOH, Choo Yong, Jeremy KE, Jinghao LINN, Scott C. We study the relation between company value and the interplay between CEO power, CEO equity incentives and the friendliness of the board of directors. Following Bebchuk, Cremers and Peyer (2011), we measure CEO power as the proportion paid to the CEO of the total compensation paid to the top five executives of the firm. We find that strong CEO equity incentives and the presence of a friendly board of directors both individually moderate the negative effect of CEO power on Tobin’s q. Moreover, these variables also work together. We find that firm value tends to increase when equity incentives are combined with a friendly board. We conclude that the negative effects of CEO power on firm value are limited to firms with weak CEO equity incentive compensation plans and arms-length boards of directors. 2015-01-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/5214 info:doi/10.2139/ssrn.2594993 https://ink.library.smu.edu.sg/context/lkcsb_research/article/6213/viewcontent/SSRN_id2594993.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University CEO power social connections corporate governance Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic CEO power
social connections
corporate governance
Finance and Financial Management
spellingShingle CEO power
social connections
corporate governance
Finance and Financial Management
CATON, Gary
GOH, Choo Yong, Jeremy
KE, Jinghao
LINN, Scott C.
The interaction effects of CEO power, social connections and incentive compensation on firm value
description We study the relation between company value and the interplay between CEO power, CEO equity incentives and the friendliness of the board of directors. Following Bebchuk, Cremers and Peyer (2011), we measure CEO power as the proportion paid to the CEO of the total compensation paid to the top five executives of the firm. We find that strong CEO equity incentives and the presence of a friendly board of directors both individually moderate the negative effect of CEO power on Tobin’s q. Moreover, these variables also work together. We find that firm value tends to increase when equity incentives are combined with a friendly board. We conclude that the negative effects of CEO power on firm value are limited to firms with weak CEO equity incentive compensation plans and arms-length boards of directors.
format text
author CATON, Gary
GOH, Choo Yong, Jeremy
KE, Jinghao
LINN, Scott C.
author_facet CATON, Gary
GOH, Choo Yong, Jeremy
KE, Jinghao
LINN, Scott C.
author_sort CATON, Gary
title The interaction effects of CEO power, social connections and incentive compensation on firm value
title_short The interaction effects of CEO power, social connections and incentive compensation on firm value
title_full The interaction effects of CEO power, social connections and incentive compensation on firm value
title_fullStr The interaction effects of CEO power, social connections and incentive compensation on firm value
title_full_unstemmed The interaction effects of CEO power, social connections and incentive compensation on firm value
title_sort interaction effects of ceo power, social connections and incentive compensation on firm value
publisher Institutional Knowledge at Singapore Management University
publishDate 2015
url https://ink.library.smu.edu.sg/lkcsb_research/5214
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6213/viewcontent/SSRN_id2594993.pdf
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