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This paper examines the link between CEO pay and performance employing a unique, hand-collected panel data set of 390 UK non-financial firms from the FTSE All Share Index for the period 1999-2005. We include both cash (salary and bonus) and equity-based (stock options and long-term incentive plans) components of CEO compensation, and CEO wealth based on share holdings, stock option and stock awards holdings in our analysis. In addition, we control for a comprehensive set of corporate governance variables. The empirical results show that in comparison to the previous findings for US CEOs, pay-performance elasticity for UK CEOs seems to be lower; pay-performance elasticity for UK CEOs is 0.075 (0.095) for cash compensation (total direct compensation), indicating that a ten percentage increase in shareholder return corresponds to an increase of 0.75% (0.95%) in cash (total direct) compensation. We also find that both the median share holdings and stock-based pay-performance sensitivity are lower for UK CEOs when we compare our findings with the previous findings for US CEOs. Thus, our results suggest that corporate governance reports in the UK, such as the Greenbury Report (1995) that proposed CEO compensation be more closely linked to performance, have not been totally effective. Our findings also indicate that institutional ownership has a positive and significant influence on CEO pay-performance sensitivity of option grants. Finally, we find that longer CEO tenure is associated with lower pay-performance sensitivity of option grants suggesting the entrenchment effect of CEO tenure.

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This paper investigates cash holding behaviour of firms from France, Germany, Japan, the UK and the US using data for 4,069 companies over the period 1996-2000. Our focus is particularly on the relation between cash holdings and leverage. We argue that the impact of leverage on cash balances of firms is likely to be non-monotonic. To the extent that leverage of firms acts as a proxy for their ability to issue debt one would expect a negative (substitution effect) relation between leverage and cash holdings. However, as leverage increases firms are likely to accumulate larger cash reserves to minimise the risk of financial distress and costly bankruptcy. Thus, one would expect a positive (precautionary effect) relationship between cash holdings and leverage at high levels of leverage. Our findings provide strong and robust support for a significant non-linear relation between cash holdings and leverage. Additionally, our results show that the impact of leverage on cash holdings partly depends on country-specific characteristics such as the degree of creditor protection, shareholder protection, and ownership concentration.

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In this paper, we empirically investigate the impact of exchange rate volatility on real international trade ows utilizing a 13 country dataset of monthly bilateral real exports for 1980 1998. We compute one month ahead exchange rate volatility from the intra monthly variations in the exchange rate to better quantify this latent variable. We nd that the effect of exchange rate volatility on trade ows is nonlin- 1We acknowledge the expert research assistance provided by Tairi Room, and thank John Barkoulas and Franc Klaassen for productive conversations on these issues. Consultations with Nicholas J. Cox on programming practices were very helpful. We received useful comments on an earlier

This paper investigates the impact of family control and institutional investors on CEO pay packages in Continental Europe, using a large data set of 915 listed firms with 4,045 firm-year observations from 14 countries over the period [2001][2002][2003][2004][2005][2006][2007][2008]. We find that family control curbs the level of CEO total compensation which includes both cash and equity-based compensation. This effect is particularly accentuated in firms with family CEOs, indicating that controlling families do not use CEO compensation to expropriate wealth from minority shareholders. We also find that the impact of institutional ownership on CEO compensation varies depending on whether institutional investors are foreign or domestic. Our results show that domestic institutional investors play an active role in determining the level of CEO compensation by increasing the pay-for-performance sensitivity, while foreign institutional ownership increase CEO total compensation without aligning pay with performance. We also provide evidence that institutional investors partially counterbalance the negative effect of family control on CEO compensation, especially in family firms with professional CEOs, and increase the level of CEO total compensation. 190, 150 EFM Classification Codes: