Executive Compensation and Securitization: The Missing Link

44 Pages Posted: 18 Jan 2012 Last revised: 15 Jan 2016

Jonathan C. Lipson

Temple University - James E. Beasley School of Law

Ella Mae Matsumura

University of Wisconsin-Madison - Department of Accounting and Information Systems

Emre Unlu

University of Nebraska at Lincoln

Rachel Martin

Utah State University - Huntsman School of Business

Date Written: January 17, 2012

Abstract

We assess the effect that asset securitization has on executive compensation. Securitization is the process whereby firms “sell” financial assets in transactions that bear many economic characteristics of a loan. Scholars and policy makers have expressed concern about the agency costs associated with such transactions, including that they create opportunities for managers to loot companies that engage in them.

We focus on non-financial-services firms, and construct a dataset of over 15,000 firm-year observations, comparing the CEO pay of securitizing firms (1,051) to those that do not (14,301). Panel OLS fixed-effects regressions, year-on-year change regressions, matched sampling and sub-sampling analyses show that securitizers do not, in fact, pay more than non-securitizers. This, in turn, suggests that whatever its other strengths or weaknesses, securitization by non-financial-services firms is unlikely to lead to agency costs hypothesized in the literature.

Keywords: executive compensation, asset securitization, agency costs, empirical analysis

JEL Classification: G14, G32, G35, J33, K12, K22

Suggested Citation

Lipson, Jonathan C. and Matsumura, Ella Mae and Unlu, Emre and Martin, Rachel, Executive Compensation and Securitization: The Missing Link (January 17, 2012). Univ. of Wisconsin Legal Studies Research Paper No. 1194. Available at SSRN: https://ssrn.com/abstract=1987246 or http://dx.doi.org/10.2139/ssrn.1987246

Jonathan C. Lipson (Contact Author)

Temple University - James E. Beasley School of Law ( email )

1719 N. Broad Street
Philadelphia, PA 19122
United States

Ella Mae Matsumura

University of Wisconsin-Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States
608-262-9731 (Phone)
608-265-6040 (Fax)

Emre Unlu

University of Nebraska at Lincoln ( email )

Lincoln, NE 68588
United States

Rachel Martin

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
6082637720 (Phone)
6082637720 (Fax)

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