CEO compensation and future shareholder returns: Evidence from the London Stock Exchange

Balafas, Nikolaos; Florackis, Chris

doi:10.1016/j.jempfin.2013.10.011

Cited by 54 publications

(58 citation statements)

References 62 publications

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“…Core, Holthausen, and Larcker (1999) conclude that greater remuneration reflects weak corporate governance rather than good performance. A similar conclusion is reached by Balafas & Florackis (2014), Chance, Kumar, & Todd (2000), Dow & Raposo (2005), Hall & Murphy (2003), Oyer (2004), Rajgopal, Shevlin, & Zamora (2006), and many others.…”

Section: Remuneration As Incentivessupporting

confidence: 81%

A New Look at Regulating Bankers’ Remuneration

Zalewska

2016

Corporate Governance

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Manuscript Type: ConceptualResearch Questions/Issues: Executive remuneration, whether as a tool for resolving agency problems or as a sign of them, has been discussed in the literature for decades. The discussion, however, has been focused on non-financial firms, and bankers' remuneration, particularly in the context of corporate governance, has been overlooked until recently. However, following the financial crisis, regulators have begun intervening into banking boards' responsibilities, including remuneration. This raises numerous questions, in particular, how far the existing non-financial literature applies to banks, and if not, why and how this impacts on appropriate corporate governance in banking, and what challenges this brings? Research Findings/Insights: The paper argues that due to numerous externalities, notably the interconnectivity and systemic risk of the banking sector, a traditional approach to remuneration based on resolving the principal-agent conflict is inappropriate. Active involvement of regulators is needed to balance the short-term performance of the banking sector with the long-term needs of society. This, however, means that remuneration and corporate governance of banks is no longer an individual bank issue but is a national and probably an international phenomenon. In some cases this may require fundamental changes to the national governance structure, culture, and practices. Theoretical/Academic Implications: The analysis questions the suitability of the common idea of assessing corporate governance in banks in the same way as is done for non-financial institutions. Given that several traditional non-financial board responsibilities have been partially passed over to regulators in the banking sector, a new theoretical model of corporate governance is needed for banks. The paper examines relational contracts (echoed to some extent in stewardship, stakeholder, and network theories), and argues that these cannot be expected to be successful in the banking environment. Practitioner/Policy Implications: The paper highlights the importance of tying the corporate governance of banks with other regulatory measures employed to restrict risk taking. It also stresses the need for harmonization of corporate governance metrics for the banking sector at a national/international level.

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Section: Remuneration As Incentivessupporting

confidence: 81%

A New Look at Regulating Bankers’ Remuneration

Zalewska

2016

Corporate Governance

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“…First, there are studies focusing on the relationship between corporate governance or board characteristics and compensation policies (Lewellen et al, ; Zajac & Westphal, ; Conyon & Peck, ; Ryan & Wiggins, ; Hartzell & Starks, ; Conyon & He, ; Conyon, ; Ozkan, ; Laksmana, ; Petra & Dorata, ; Chhaochharia & Grinstein, ; Ozdemir & Upneja, .). Second, there are studies focusing on the relationship between compensation policies/incentives and firm performance, in both directions (Balafas & Florackis, ; Brick, Palmon, & Wald, ; Brown, Sturman, & Simmering, ; Cai, Jo, & Pan, ; Callan & Thomas, ; Coughlan & Schmidt, ; Kubo, ; Li, Yang, & Yu, ; Loomis, ; Mahoney & Thorne, ; McGuire, Dow, & Argheyd, ; Mehran, ; Raithatha & Komera, ). Third, there are studies analyzing the relationships among all the previous variables (Core, Holthausen, & Larcker, ; Lam, McGuinness, & Vieito, ).…”

Section: Literature Reviewmentioning

confidence: 99%

Sustainable compensation policies and its effect on environmental, social, and governance scores

Baraibar‐Diez

Odriozola

Sánchez

2019

Corp Soc Responsibility Env

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The incorporation of sustainable compensation policies reflects the willingness of companies to manage the behavior of directors towards long-term goals, responding to a large number of stakeholders with different demands. Analysis of compensation policies is biased to financial performance, so that the effectiveness of sustainable policies remains unexplored. This paper investigates whether having a sustainable compensation policy has a positive influence on environmental, social, and governance (ESG) and economic scores. These relationships are tested by estimating a fixed-effects model for listed companies from Spain, France, Germany, and the United Kingdom in the period 2005-2015. According to the results, sustainable compensation policies affect ESG scores, but especially when firms have a corporate social responsibility committee acting as control mechanism and supporting the achievement of those objectives, triggering better nonfinancial performance. This paper contributes to literature by exploring the effect of sustainable incentives and expands the range and richness of results by including four different scores.

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“…One argument stated that executives' compensation should be linked to past performance. In contrast, there is also the argument that the reward of the executive is for the action will benefit the firm in the long run that is not always reflected in currently observable performance (Balafas and Florackis, 2014).…”

Section: Introductionmentioning

confidence: 99%

Executive’s compensation, good corporate governance, ownership structure, and firm performance: a study of listed banks in Indonesia

Chou¹,

Buchdadi²

2018

JBRMR

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This study aims to examine the relationship between executive's compensation and firm performance in the banking industry in Indonesia. This study also determines the impact of remuneration and nomination committee (RNC) on executive's compensation (EC) and firm performance. The samples are listed bank in Indonesia during 2006-2015. The regression uses two stage least square (2SLS) with unbalanced panel data. The findings reveal that performance on pay and pay on performance are valid in Indonesia. However, the performance is only for accounting-based performance but not for market value-based performance. Furthermore, in examining the role of remuneration and nomination committee (RNC), the findings reveal that the RNC has a negative relationship to the executives' compensation (ES). It seems the role of the RNC is preventing the overpaid of the EC. Finally, regarding the ownership structure, The state banks have the similar behavior with the main findings in this research. However, only in the state bank, the RNC has a real impact on both accounting-based performance and market value-based performance. While ownership concentration (BO) variable which is used as dependent variables in this study reveals the possibility of the agency problems or inactive block holders condition that make ineffective monitoring role of the corporation since the findings show that the more BO, the more EC, and the worse firms performance.

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CEO compensation and future shareholder returns: Evidence from the London Stock Exchange

Cited by 54 publications

References 62 publications

A New Look at Regulating Bankers’ Remuneration

A New Look at Regulating Bankers’ Remuneration

Sustainable compensation policies and its effect on environmental, social, and governance scores

Executive’s compensation, good corporate governance, ownership structure, and firm performance: a study of listed banks in Indonesia

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