EXECUTIVE OWNERSHIP, CORPORATE VALUE, AND EXECUTIVE-COMPENSATION - A UNIFYING FRAMEWORK

This study presents an integrated investigation into the factors affec ting executive ownership, the market value of the firm, and executive compensation by explicitly incorporating the simultaneity of the proce ss determining these variables into the empirical estimation. Overall, the results of the study support the notion that a firm's market valu e, executive stock ownership, and executive compensation are jointly d etermined. Further, the findings suggest that executive stock ownershi p and executive compensation may serve as a type of bond by which top executives are induced to act in the best interests of shareholders. T he study also finds that a firm's q ratio and an executive's job-speci fic experience (as well as firm size) are important determinants of ex ecutive compensation. This result is generally consistent with the vie w that the firm optimally establishes its managerial compensation plan in response to both its operating environment and the specific person al characteristics of its chief executive(s).