CEO Compensation, Family Control, and Institutional Investors in Continental Europe

49 Pages Posted: 27 Aug 2010 Last revised: 10 Jul 2012

See all articles by Ettore Croci

Ettore Croci

Catholic University of the Sacred Heart of Milan

Halit Gonenc

University of Groningen - Faculty of Economics and Business

Neslihan Ozkan

University of Bristol - School of Economics, Finance and Management, UK

Date Written: July 9, 2012

Abstract

This paper investigates the impact of family control and institutional investors on CEO pay packages in Continental Europe, using a dataset of 754 listed firms with 3,731 firm-year observations from 14 countries during 2001-2008. We find that family control curbs the level of CEO total and cash compensation, and the fraction of equity-based compensation. Moreover, we do not observe a significant effect of family control on the excess level of total and cash compensation. This evidence indicates that controlling families do not use CEO compensation to expropriate wealth from minority shareholders. We show that institutional ownership is associated with higher levels of CEO cash and total compensation in Continental Europe, especially in family firms. Also, foreign institutional investors have a positive, significant impact on CEO compensation level. Finally, results indicate that institutional investors affect CEO pay structure: they increase the use of equity-based compensation in both family and non-family firms.

Keywords: CEO compensation, family firms, institutional investors, Europe

JEL Classification: G34

Suggested Citation

Croci, Ettore and Gonenc, Halit and Ozkan, Neslihan, CEO Compensation, Family Control, and Institutional Investors in Continental Europe (July 9, 2012). Available at SSRN: https://ssrn.com/abstract=1578391 or http://dx.doi.org/10.2139/ssrn.1578391

Ettore Croci (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

Halit Gonenc

University of Groningen - Faculty of Economics and Business ( email )

P.O. Box 100
Groningen, 9700 AV
Netherlands
+31 0 50 363 4237 (Phone)
+31 0 50 363 3850 (Fax)

Neslihan Ozkan

University of Bristol - School of Economics, Finance and Management, UK ( email )

United States

HOME PAGE: http://www.bristol.ac.uk/accounting/staff/ozkan.html

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