Date of Award

5-4-2021

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Accountancy

First Advisor

Dr. Douglas E. Stevens; Dr. Matthew D. DeAngelis

Second Advisor

Dr. Amanda W. Beck

Third Advisor

Dr. James R. Moon, Jr.

Abstract

Prior compensation literature documents and investigates trending practices in CEO incentive contracting by exploring the designs of individual contractual components (e.g., performance targets, pay type, etc.) rather than the overall contract structure. Using distance measures based on a comprehensive set of contract elements derived from firms’ proxy statements, I identify factors that are associated with a firm’s CEO compensation structure homogeneity, which describes the degree to which a firm’s CEO compensation structure is similar to industry practice. My study demonstrates that, consistent with the predictions under optimal contracting theory, a firm adopts a CEO compensation contract that is more similar to industry practice when the firm shares more common risks with its industry or when its owners share more common interests with its industry peers. However, the board of directors’ ability to communicate and obtain inside information, as well as the use of compensation consultants, also contributes to compensation homogeneity unexplained by general CEO/firm specific characteristics. Lastly, I find evidence that CEO compensation homogeneity has a negative association with shareholders’ wealth in the subsequent periods.

DOI

https://doi.org/10.57709/22705212

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