Document Type

Article

Publication Date

2009

Publication Title

Journal of Banking and Finance

Volume

33

Issue

8

First Page

1507

Last Page

1519

Keywords

CEO compensation, Compensation committees, Stock option grants

Abstract

This paper examines whether the relationship between future firm performance and chief executive officer (CEO) stock option grants is affected by the quality of the compensation committee. Compensation committee quality is measured using six committee characteristics--the proportion of directors appointed during the tenure of the incumbent CEO, the proportion of directors with at least ten years' board service, the proportion of directors who are CEOs at other companies, the aggregate shareholding of directors on the compensation committee, the proportion of directors with three or more additional board seats, and compensation committee size. We find that future firm performance is more positively associated with stock option grants as compensation committee quality increases.

Comments

NOTICE: this is the author’s version of a work that was accepted for publication in the Journal of Banking & Finance and Accounting. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in the Journal of Banking & Finance and Accounting 33 (8), 2009 and is available here.

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