Ownership concentration and sensitivity of executive pay to accounting performance measures: Evidence from publicly and privately-held insurance companies
B. Ke et al., Ownership concentration and sensitivity of executive pay to accounting performance measures: Evidence from publicly and privately-held insurance companies, J ACCOUNT E, 28(2), 1999, pp. 185-209
We investigate the relation between CEO compensation and accounting perform
ance measures as a function of ownership structure. We use publicly-held pr
operty-liability insurers to consider the relation for firms with diffusely
-held ownership and use privately-held property-liability insurers to consi
der the relation for firms with closely-held ownership. We find a significa
nt positive association between return on assets and the level of compensat
ion for publicly-held insurers. Consistent with optimal contracting theory,
we find no such relationship for privately-held insurers. Results suggest
that within closely-held firms CEO compensation is less based on objective
measures like accounting information and more on subjective measures. (C) 1
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