Does CEO compensation matter in boosting firm performance? Evidence from listed French firms

Faten Zoghlami

33 citations0/0 files storedManagerial and Decision Economics

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Corporate Finance and Governance Accounting and Organizational Management Corporate Governance and Financial Management

Abstract

The paper investigates the impact of chief executive officer (CEO) compensation on firm performance from a sample of 155 listed French companies on SBF 120, over 2009–2018. Findings suggest that an increase in CEO compensation seems to improve the accounting‐based firm performance, nevertheless it hurts the firm stock market value. More pronounced results are reported when we control for sector compensation interactions. We argue that attractive compensation may improve the executive services in achieving shareholders' objectives, but investors seem to not appreciate a CEO compensation increase. Based on the agency theory, it might be argued that investors fear possible executive opportunistic behavior encouraging them to enjoy overcompensation.

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References

1998Initial conditions and moment restrictions in dynamic panel data models 1983Separation of Ownership and Control 1997A Survey of Corporate Governance 1993Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency 1979Moral Hazard and Observability 1990Performance Pay and Top-Management Incentives 2003Executive Compensation as an Agency Problem 2001Are CEOs Rewarded for Luck? The Ones Without Principals Are

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