The Ruse of a One-Dollar CEO Salary
Gilberto R. Loureiro
University of Minho - School of Economics and Management
Anil K. Makhija
Ohio State University (OSU) - Department of Finance
BI Norwegian Business School
January 10, 2014
Charles A. Dice Center Working Paper No. 2011-7
Fisher College of Business Working Paper No. 2011-03-007
We study the motives and impact of $1 CEO salaries on firm performance and CEO compensation. We find that on average $1 CEO firms earn lower stock market returns relative to their peers following the adoptions of $1 salaries. The underperformance is especially pronounced for firms that adopt $1 CEO salaries for reasons other than restructuring, experiencing about 30% lower stock returns during the three-year post-adoption period. Meanwhile, CEOs in these firms are better off since they get more total compensation and larger equity grants in the second year following adoptions than the loss in pay in the first year.
Number of Pages in PDF File: 47
Keywords: CEO compensation, CEO characteristics
JEL Classification: G30, G32, G34
Date posted: March 18, 2010 ; Last revised: January 17, 2014
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