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Monitoring and CEO Contractual Incentive Pay

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  • Fan Yu

Abstract

This paper finds that a CEO who is better monitored tends to have smaller wealth‐performance sensitivity (WPS). The results are consistent with the optimal contracting view and are robust to different measures of WPS. The findings suggest caution in drawing conclusions when researchers use WPS as an observable outcome of monitoring to test the effectiveness of monitoring. The association of monitoring and WPS is not necessarily positive, as assumed by prior corporate governance research.

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  • Fan Yu, 2020. "Monitoring and CEO Contractual Incentive Pay," International Review of Finance, International Review of Finance Ltd., vol. 20(3), pages 701-736, September.
    • Handle: RePEc:bla:irvfin:v:20:y:2020:i:3:p:701-736
    DOI: 10.1111/irfi.12238
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