Hamid Mehran, David Yermack
ABSTRACT
An examination of CEO compensation and turnover in 452 large U.S. companies
between 1984 and 1991 provides evidence that compensation policies play
a significant role in retaining the services of top managers. We find inverse
associations between the probability of CEO turnover and the amount by
which their compensation is higher than expected. We also find inverse
associations between the probability of CEO turnover and the dollar value
of stock option compensation in relation to cash pay. The results, which
are significant across the entire sample of CEOs, appear stronger for subsamples
of CEO departures likely to have been voluntary.
Subject: Corporate Governance; Agency Theory (Empirical)
Mehran: (847) 491-7436 h-mehran@nwu.edu
Yermack: (212) 998-0357 dyermack@stern.nyu.edu
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