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http://ssrn.com/abstract=1758860
 
 

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CEO Compensation Contagion: Evidence from an Exogenous Shock


Frederick L. Bereskin


University of Delaware

David C. Cicero


University of Alabama - Culverhouse College of Commerce & Business Administration

August 3, 2012

Journal of Financial Economics (JFE), Vol. 107, Issue 2

Abstract:     
We examine how Chief Executive Officer (CEO) compensation increased at a subset of firms in response to a governance shock that affected compensation levels at other firms in the economy. We first show that Delaware-incorporated firms with staggered boards and no outside blockholders increased CEO compensation following the mid-1990s Delaware legal cases that strengthened their ability to resist hostile takeovers. Consistent with the Gabaix and Landier (2008) contagion hypothesis, non-Delaware firms subsequently increased CEO compensation when the rulings affected a substantial number of firms in their industries. We further show how these legal developments contributed significantly to the rapid increase in CEO compensation in the late 1990s.

Number of Pages in PDF File: 55

Keywords: Compensation, Delaware, Staggered Board, Poision Pill, Corporate Law, Contagion, Peer Group Analysis

JEL Classification: G30, G34

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Date posted: February 12, 2011 ; Last revised: April 25, 2014

Suggested Citation

Bereskin, Frederick L. and Cicero, David C., CEO Compensation Contagion: Evidence from an Exogenous Shock (August 3, 2012). Journal of Financial Economics (JFE), Vol. 107, Issue 2. Available at SSRN: http://ssrn.com/abstract=1758860 or http://dx.doi.org/10.2139/ssrn.1758860

Contact Information

Frederick L. Bereskin
University of Delaware ( email )
Alfred Lerner College of Business and Economics
Newark, DE 19716
United States
David C. Cicero (Contact Author)
University of Alabama - Culverhouse College of Commerce & Business Administration ( email )
Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
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