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- Title
Institutional Investment Horizons and CEO Compensation.
- Authors
JAE YONG SHIN
- Abstract
I investigate the relation between the structure of CEO compensation and the investment horizons of a firm's institutional investors and find results consistent with the assertion that short-sighted institutions' focus on short- term earnings leads firms to grant more options with higher sensitivity to stock price. In contrast, the percentage holdings of long-term investors are negatively correlated with the use of options and the sensitivity of total CEO equity incentives to changes in stock price. Further results suggest that firms with higher short-term institutional ownership are more concerned about a negative earnings surprise and that when determining annual bonuses, they punish their CEOs more severely. In total, the analyses provide evidence that the investment horizon of institutional investors is associated with firms' CEO compensation policies.
- Subjects
INSTITUTIONAL investments; EXECUTIVE compensation; CHIEF executive officers; INSTITUTIONAL investors; STOCK prices; INSTITUTIONAL ownership (Stocks); CORPORATE profits
- Publication
Seoul Journal of Business, 2011, Vol 17, Issue 1, p93
- ISSN
1226-9816
- Publication type
Article
- DOI
10.35152/snusjb.2011.17.1.004