Additional Evidence on the Association between Director Stock Ownership and Incentive Compensation
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]
Accounting | Corporate Finance
Financial Performance Analysis
Review of Quantitative Finance and Accounting
Additional Evidence on the Association between Director Stock Ownership and Incentive Compensation. (2002). Review of Quantitative Finance and Accounting. 19, (1), 21-44. Research Collection School Of Accountancy.
Available at: http://ink.library.smu.edu.sg/soa_research/623