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Institutional Investors and Executive CompensationJay C. HartzellUniversity of Texas at Austin - Department of Finance Laura T. StarksUniversity of Texas at Austin - Department of Finance September 2002 AFA 2003 Washington, DC Meetings Abstract: We find that institutional ownership concentration is positively related to the pay-for-performance sensitivity of executive compensation and negatively related to the level of compensation, even after controlling for firm size, industry, investment opportunities and performance. These results suggest that the institutions serve a monitoring role in mitigating the agency problem between shareholders and managers. Additionally, we find that clientele effects exist among institutions for firms with certain compensation structures, suggesting that institutions also influence compensation structures through their preferences.
Number of Pages in PDF File: 36 Keywords: Executive compensation, institutional investors, pay-for-performance, large shareholders, agency problems JEL Classification: G30, G32, G34 working papers seriesDate posted: September 6, 2000Suggested CitationContact Information
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