Effect of the Sarbanes-Oxley Act on CEOs' Stock Ownership and Pay-Performance Sensitivity
Hiu Lam Choy
Hong Kong Polytechnic University
September 16, 2008
Review of Quantitative Finance and Accounting, 2011
The Sarbanes-Oxley Act (SOX) provides a natural experiment for examining how stock ownership and executive pay structure adapt to a change in regulatory environment. Using annual compensation data of S&P 1500 firms in 1994-2005, we examine the impact of SOX on stock ownership and pay-performance sensitivity of CEOs. Consistent with our expectations, we find that in light of SOX: (i) stock ownership and (ii) the total pay-performance sensitivity of CEOs have decreased substantially, indicating that SOX induces a weaker incentive alignment between shareholders and CEOs. In contrast, we find that after SOX stock ownership and the total pay-performance sensitivity of CEOs have remained unchanged in the regulated industries.
Number of Pages in PDF File: 52
Keywords: SOX, CEO, stock ownership, pay-performance sensitivity
JEL Classification: G38, J33, G32Accepted Paper Series
Date posted: September 16, 2008 ; Last revised: May 20, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.406 seconds