Executive Compensation and Securitization: The Missing Link
Jonathan C. Lipson
Temple University - James E. Beasley School of Law
Ella Mae Matsumura
University of Wisconsin-Madison - Department of Accounting and Information Systems
University of Nebraska at Lincoln
University of Wisconsin - Madison - Department of Accounting and Information Systems
January 17, 2012
Univ. of Wisconsin Legal Studies Research Paper No. 1194
We assess the effect that asset securitization has on executive compensation. Securitization is the process whereby firms “sell” financial assets in transactions that bear many economic characteristics of a loan. Scholars and policy makers have expressed concern about the agency costs associated with such transactions, including that they create opportunities for managers to loot companies that engage in them.
We focus on non-financial-services firms, and construct a dataset of over 15,000 firm-year observations, comparing the CEO pay of securitizing firms (1,051) to those that do not (14,301). Panel OLS fixed-effects regressions, year-on-year change regressions, matched sampling and sub-sampling analyses show that securitizers do not, in fact, pay more than non-securitizers. This, in turn, suggests that whatever its other strengths or weaknesses, securitization by non-financial-services firms is unlikely to lead to agency costs hypothesized in the literature.
Number of Pages in PDF File: 44
Keywords: executive compensation, asset securitization, agency costs, empirical analysis
JEL Classification: G14, G32, G35, J33, K12, K22
Date posted: January 18, 2012 ; Last revised: June 29, 2012
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