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- Title
AGENCY COSTS IN THE ERA OF ECONOMIC CRISIS: THE ENHANCED CONNECTION BETWEEN CEO COMPENSATION AND CORPORATE CASH HOLDINGS.
- Authors
Ganor, Mira
- Abstract
This Article reports the results of an empirical study that suggest that the current economic crisis has changed managerial behavior in the United States in a way that may impede economic recovery. The study finds a strong, statistically significant, and economically meaningful, positive correlation between CEO total annual compensation and corporate cash holdings during the economic crisis in the years 2008--2010. Such a significant correlation did not exist in prior years. The empirical findings suggest that high CEO compensation increases managerial risk-aversion in times of crisis. The Article considers several explanations for these empirical findings, some of which imply a market failure. The study has implications for the discussion on managerial pay arrangements and the implementation of the Dodd-Frank Act concerning say on pay.
- Subjects
UNITED States; GLOBAL Financial Crisis, 2008-2009; RECESSIONS; ECONOMIC recovery; EXECUTIVE compensation; DODD-Frank Wall Street Reform &; Consumer Protection Act; CASH position of corporations
- Publication
Arizona Law Review, 2013, Vol 55, Issue 1, p105
- ISSN
0004-153X
- Publication type
Article