Additional Evidence on the Association between Director Stock Ownership and Incentive Compensation

Publication Type

Journal Article

Publication Date

7-2002

Abstract

Governance scholars argue that outside directors have little incentive to monitor managers when their equity stake in the firm is not significant. A sample with a substantial level of outside director shareholdings is examined and a negative relationship between incentive compensation and outside director stock ownership is found. While firms pay higher incentive compensation when they have greater investment opportunities, the compensation contains excess pay due to ineffective corporate governance. Overall, the results suggest more effective corporate governance and lower incentive compensation when outside director stock ownership is higher. [PUBLICATION ABSTRACT]

Discipline

Accounting | Corporate Finance

Research Areas

Financial Performance Analysis

Publication

Review of Quantitative Finance and Accounting

Volume

19

Issue

1

First Page

21

Last Page

44

ISSN

0924-865X

Identifier

10.1023/A:1015726224797

Publisher

Springer

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