Does Enhanced Disclosure Curb CEO Pay? Evidence from a Modern Information Technology Improvement

56 Pages Posted: 31 Jul 2023 Last revised: 27 Nov 2023

See all articles by Ilona Babenko

Ilona Babenko

Arizona State University

Benjamin Bennett

Tulane University - A.B. Freeman School of Business

Zexi Wang

Lancaster University

Date Written: July 27, 2023

Abstract

We provide evidence that enhanced disclosure curbs CEO pay. Using a difference-in-differences design around the staggered implementation of the SEC EDGAR system from 1993 to 1996, we find that media coverage of executive pay increases following EDGAR implementation and that total CEO pay drops by 7-10%. The effect on pay is stronger for CEOs in the upper tail of the compensation distribution and concentrates in equity-based pay, resulting in weaker CEO compensation incentives (delta and vega). Our results suggest that disclosure-related changes in CEO incentives have negative implications for firm value. Finally, we find higher CEO turnover following EDGAR implementation.

Keywords: executive compensation, CEO pay, disclosure, governance reform, CEO turnover

JEL Classification: G30, G32

Suggested Citation

Babenko, Ilona and Bennett, Benjamin and Wang, Zexi, Does Enhanced Disclosure Curb CEO Pay? Evidence from a Modern Information Technology Improvement (July 27, 2023). Available at SSRN: https://ssrn.com/abstract=4523306 or http://dx.doi.org/10.2139/ssrn.4523306

Ilona Babenko

Arizona State University ( email )

Department of Finance
W.P. Carey School of Business
Tempe, AZ 85287
United States

Benjamin Bennett (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

HOME PAGE: https://sites.google.com/site/benjaminbennettfinance/home

Zexi Wang

Lancaster University ( email )

Lancaster University Management School
Bailrigg
Lancaster, LA1 4YX
United Kingdom

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