Abstract

http://ssrn.com/abstract=2024398
 


 



CEO Compensation and the Role of In-House Experience


Paul Brockman


Lehigh University; Centre for International Finance and Regulation (CIFR)

Hye Seung "Grace" Lee


Lehigh University - Department of Accounting

Jesus M. Salas


Lehigh University

March 15, 2012


Abstract:     
We hand collect a database that includes a direct measure of the incoming CEO’s in-house experience at the time of succession. In contrast to previous studies that rely on an insider-outsider binary variable, our continuous variable allows us to examine compensation incentives following CEO successions across a continuum of in-house experience. We hypothesize and confirm that more in-house experience prior to succession leads to lower CEO total compensation at succession. In addition to total compensation, we find significant differences in the components of compensation. CEOs with more in-house experience receive larger cash-based incentives and smaller performance-based incentives than CEOs with little or no in-house experience at succession. Consistent with expectations, CEOs with substantial in-house experience also have lower wealth-to-risk sensitivities. Overall, our results show that CEO incentive contacts are significantly influenced by the level of in-house experience.

Number of Pages in PDF File: 45

Keywords: CEO succession, executive compensation, corporate governance

JEL Classification: G30, G34, J33

working papers series


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Date posted: March 19, 2012  

Suggested Citation

Brockman, Paul and Lee, Hye Seung "Grace" and Salas, Jesus M., CEO Compensation and the Role of In-House Experience (March 15, 2012). Available at SSRN: http://ssrn.com/abstract=2024398 or http://dx.doi.org/10.2139/ssrn.2024398

Contact Information

Paul Brockman (Contact Author)
Lehigh University ( email )
Bethlehem, PA 18015
United States
Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Hye Seung Lee
Lehigh University - Department of Accounting ( email )
United States
Jesus M. Salas
Lehigh University ( email )
Bethlehem, PA 18015
United States
610-758-3238 (Phone)
HOME PAGE: http://www3.lehigh.edu/business/faculty/salas.asp
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