CEO Compensation, Family Control, and Institutional Investors in Continental Europe
49 Pages Posted: 27 Aug 2010 Last revised: 10 Jul 2012
Date Written: July 9, 2012
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: Suggested Citation