Download this Paper Open PDF in Browser

Say on Pay Laws, Executive Compensation, Pay Slice, and Firm Valuation around the World

57 Pages Posted: 28 Apr 2014 Last revised: 17 Aug 2016

Ricardo Correa

Board of Governors of the Federal Reserve System

Ugur Lel

University of Georgia - Department of Banking and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: January 20, 2016

Abstract

Using a large sample of firms from 38 countries over the 2001-2012 period, we find evidence that following say on pay (SoP) laws, CEO pay growth rates decline and the sensitivity of CEO pay to firm performance improves. These changes are mostly concentrated on firms with high excess pay and shareholder dissent, long CEO tenure, and busy and less independent boards as of the period prior to the adoption of SoP laws. Further, the portion of total top management pay captured by CEOs is lower in the post-SoP period, which is associated with higher firm valuations. Overall, these results suggest that SoP laws are associated with significant changes in CEO pay policies.

Keywords: Executive compensation, say on pay laws, regulations, CEO pay slice, corporate governance, firm valuation, international.

JEL Classification: G15, G34, G38, M12

Suggested Citation

Correa, Ricardo and Lel, Ugur, Say on Pay Laws, Executive Compensation, Pay Slice, and Firm Valuation around the World (January 20, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2430465 or http://dx.doi.org/10.2139/ssrn.2430465

Ricardo Correa (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Ugur Lel

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States

Paper statistics

Downloads
938
Rank
13,883
Abstract Views
2,644