Firm Expansion and CEO Pay

Lucian A. Bebchuk · Yaniv Grinstein

46 citations0/0 files storedNational Bureau of Economic Research

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Corporate Finance and Governance Financial Markets and Investment Strategies Auditing, Earnings Management, Governance

Abstract

We study the extent to which decisions to expand firm size are associated with increases in subsequent CEO compensation.Controlling for past stock performance, we find a positive correlation between CEO compensation and the CEO's past decisions to increase firm size.This correlation is economically meaningful; for example, other things being equal, CEOs who in the preceding three years were in the top quartile in terms of expanding by increasing the number of shares outstanding receive compensation that is higher by one-third than the compensation of CEOs belonging to the bottom quartile.We also find that stock returns are correlated with subsequent CEO pay only to the extent that they contribute to expanding firm size; only the component of past stock returns not distributed as dividends is correlated with subsequent CEO pay.Finally, we find an asymmetry between increases and decreases in size: while increases in firm size are followed by higher CEO pay, decreases in firm size are not followed by reduction in such pay.The association we find between CEOs' compensation and firm-expanding decisions undertaken earlier during their service could provide CEOs with incentives to expand firm size.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 46 citations exist upstream.

References

1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1996Agency costs of free cash flow, corporate finance, and takeovers 1990Performance Pay and Top-Management Incentives 1999Corporate governance, chief executive officer compensation, and firm performance 1992The investment opportunity set and corporate financing, dividend, and compensation policies 1981Risk Reduction as a Managerial Motive for Conglomerate Mergers 2005Pay without performance: the unfulfilled promise of executive compensation 1990Do Managerial Objectives Drive Bad Acquisitions?

Cited by

2007Incentives for Information Production in Markets Where Prices Affect Real Investment 2018Global Mindset and Entry Mode Decisions: Moderating Roles of Managers’ Decision-Making Style and Managerial Experience 2003Shareholder Rights, Boards, and CEO Compensation 2019Unfolding China’s state-owned corporate empires and mitigating agency hazards: Effects of foreign investments and innovativeness 2022The effect of CEO power on overinvestment

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.