Diffusion of Corporate Governance from Influential Adopters

63 Pages Posted: 2 Nov 2015 Last revised: 6 Jun 2017

See all articles by Jason J. Xiao

Jason J. Xiao

University of Rochester - Simon Business School

Date Written: June 1, 2016

Abstract

Based on diffusion theory, I conjecture that governance mechanisms, in particular performance-contingent equity (PCE), exhibit influential adopter diffusion. That is, firms tend to emulate an influential industry peer in adopting PCE in their executive compensation contracts. I find evidence of influential adopter diffusion through robust positive relations between firms’ and influential adopters’ PCE use and design. Additional analyses show that the diffusion relation varies inversely with industry heterogeneity and differences in CEO compensation structure, and is not driven by window-dressing incentives. In sum, my findings shed light on the spread of PCE over time by way of influential adopter diffusion.

Keywords: Corporate governance; Performance-contingent equity; Influential adopter diffusion

JEL Classification: G34; M41; O33

Suggested Citation

Xiao, Jason J., Diffusion of Corporate Governance from Influential Adopters (June 1, 2016). Available at SSRN: https://ssrn.com/abstract=2684597 or http://dx.doi.org/10.2139/ssrn.2684597

Jason J. Xiao (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
179
rank
164,133
Abstract Views
1,131
PlumX Metrics