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CEO pay, shareholder returns, and accounting profits

Guy, Frederick (2000) CEO pay, shareholder returns, and accounting profits. International Journal of the Economics of Business 7 (3), pp. 263-274. ISSN 1357-1516.


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We assess the impact on CEO pay (including salary, cash bonus, and benefits in kind) of changes in both accounting and shareholder returns in 99 British companies in the years 1972-89. After correcting for heterogeneity biases inherent in the standard specifications of the problem, we find a strong positive relationship between CEO pay and within-company changes in shareholder returns, and no statistically significant relationship between CEO pay and within-company changes in accounting returns. Differences between firms in long-term average profitability do appear to have a substantial effect on CEO pay, while differences between firms in shareholder returns add nothing to the within-firm pay dynamics.These findings call into question the rationale for explicitly share-based incentive schemes.

Item Type: Article
Keyword(s) / Subject(s): accounting, chief executive officers, incentives in industry, stocks, wages, CEO pay, random coefficients
School or Research Centre: Birkbeck Schools and Research Centres > School of Business, Economics & Informatics > Management
Depositing User: Administrator
Date Deposited: 21 Mar 2007
Last Modified: 17 Apr 2013 12:33

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