IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v59y2024i4p1886-1925_13.html
   My bibliography  Save this article

The Use of Peer Groups in Setting Director Compensation: Competition for Talent Versus Self-Serving Behavior

Author

Listed:
  • Chen, Sheng-Syan
  • Chien, Cheng-Yi
  • Huang, Chia-Wei

Abstract

Recent Delaware Chancery Court decisions that boards are self-interested in setting director compensation have focused scrutiny on the pay-setting process used by corporations. We examine the effect of peer benchmarking on director compensation decisions. Director pay relates positively to peer director pay, and firms paying their directors highly are selected as peers. Moreover, firm performance and board advising performance are positively related to the talent component and are generally unrelated to the self-serving component of the peer pay effect. The evidence indicates that firms use peer benchmarking to justify high compensation mainly to attract talented directors to enhance board quality.

Suggested Citation

  • Chen, Sheng-Syan & Chien, Cheng-Yi & Huang, Chia-Wei, 2024. "The Use of Peer Groups in Setting Director Compensation: Competition for Talent Versus Self-Serving Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 59(4), pages 1886-1925, June.
    • Handle: RePEc:cup:jfinqa:v:59:y:2024:i:4:p:1886-1925_13
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S002210902300039X/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:59:y:2024:i:4:p:1886-1925_13. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.