The Influence of Institutional Investors Over Executive Remuneration in the UK

75 Pages Posted: 24 Jan 2008

See all articles by Mike Strivens

Mike Strivens

University of Manchester - Division of Accounting and Finance

Susanne Espenlaub

University of Manchester - Division of Accounting and Finance

Martin Walker

University of Manchester - Manchester Business School

Date Written: December 14, 2007

Abstract

This paper analyses the relationship between institutional shareholdings and CEO cash-based remuneration. Uniquely to this field of research we specifically model the different elements of cash-based remuneration separately to account for the timing differences relating to their award and performance criteria. We document 5 significant empirical regularities. First, controlling for firm size, the presence of a large institutional shareholding, or high concentration of institutional shareholdings, significantly reduces the magnitude of salary and bonuses. Second, institutional shareholdings significantly increase the positive relationship between bonus remuneration and firm performance. Third, the presence of a large institutional shareholding, or high concentration of institutional shareholdings, reduces the rates of increase in salary, benefits and bonuses. Fourth, the magnitude of salary and benefits are negatively related to firm performance. This implies that CEOs are taking their contracted salary regardless of firm performance. Fifth, the standard practice of modelling salary and bonuses together produces misleading results. We demonstrate that as salary and bonuses are payments for different reasons and relate to different time periods over which performance is measured they should be modelled separately.

Keywords: Executive Remuneration, Institutional Investors

JEL Classification: G32

Suggested Citation

Strivens, Mike and Espenlaub, Susanne K. and Walker, Martin, The Influence of Institutional Investors Over Executive Remuneration in the UK (December 14, 2007). Available at SSRN: https://ssrn.com/abstract=991590 or http://dx.doi.org/10.2139/ssrn.991590

Mike Strivens (Contact Author)

University of Manchester - Division of Accounting and Finance ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom
+44 (0) 161 275 4016 (Phone)

Susanne K. Espenlaub

University of Manchester - Division of Accounting and Finance ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom
44 161 275 4026 (Phone)

Martin Walker

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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