Directors Compensation and Shareholders Expropriation: Evidence from Italy

29 Pages Posted: 19 Feb 2009  

Andrea Carosi

University of Sassari - Department of Economics and Business

Stefano Mengoli

University of Bologna - Department of Management

Date Written: February 15, 2009

Abstract

This paper investigates the relation between directors' compensation and the dominant shareholder's propensity to expropriate the minorities. Given the documented director's capability to conveniently influence their pay-package, and the corporate exposure to expropriation by the controlling shareholder, we find that directors remuneration contract, both in his components and in his value, discount the company expropriation's probability. We conclude that control enhancing devices increase agency costs, since they are exploited by directors, as well as the dominant shareholder, in order to maximize the resources extractible by the company.

Keywords: Corporate governance, Directors, Expropriation, Compensation

JEL Classification: G32, G34, K22, J33

Suggested Citation

Carosi, Andrea and Mengoli, Stefano, Directors Compensation and Shareholders Expropriation: Evidence from Italy (February 15, 2009). Available at SSRN: https://ssrn.com/abstract=1343990 or http://dx.doi.org/10.2139/ssrn.1343990

Andrea Carosi (Contact Author)

University of Sassari - Department of Economics and Business ( email )

Via Muroni, 25
Sassari, Sassari 07100
Italy
+39 079 213036 (Phone)

Stefano Mengoli

University of Bologna - Department of Management ( email )

Via Capo di Lucca, 24
http://stefanomengoli.weebly.com/
Bologna, Bologna 40132
Italy

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