Does social capital mitigate agency problems? Evidence from Chief Executive Officer (CEO) compensation

Chun-Keung Hoi, Qiang Wu, Hao Zhang

    OnderzoeksoutputAcademicpeer review

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    We find that social capital, as captured by secular norms and social networks surrounding corporate headquarters, is negatively associated with levels of CEO compensation. This relation holds in a range of robustness tests including those that address omitted variable bias and reverse causality. Additionally, social capital reduces the likelihood that firms make opportunistic option grant awards that unduly favor CEOs, including lucky awards, backdated awards, and unscheduled awards. Social capital also lessens the accretive effect of CEO power on CEO compensation. These findings indicate that social capital mitigates agency problems by restraining managerial rent extraction in CEO compensation. (C) 2019 Elsevier B.V. All rights reserved.

    Originele taal-2English
    Pagina's (van-tot)498-519
    Aantal pagina's22
    TijdschriftJournal of Financial Economics
    Volume133
    Nummer van het tijdschrift2
    Vroegere onlinedatum14-feb-2019
    DOI's
    StatusPublished - aug-2019

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