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CEO pay disparity, chaebol affiliations, and implied cost of equity capital

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  • Chun, Hong-min

Abstract

This paper examines CEO pay disparity and its effect on the implied cost of equity capital (ICOE). Existing empirical results suggest that a higher CEO pay disparity increases the ICOE. Thus, a chaebol-affiliated firm with a high CEO pay disparity could be a possible factor contributing to the risk premium. As a result, in Korea, a higher CEO pay disparity represents a risk premium closely related to the management power perspective (Chen et al., 2013). Further, this positive association is more pronounced in a chaebol with low internal monitoring (low outside director ratio) firms.

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  • Chun, Hong-min, 2019. "CEO pay disparity, chaebol affiliations, and implied cost of equity capital," Finance Research Letters, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:s1544612318303465
    DOI: 10.1016/j.frl.2018.12.029
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    2. Zhu, Mengzhen & Shin, Hyun-Han, 2024. "Do other firms’ stock price crashes affect corporate investment decisions within the business group: Evidence from Korean Chaebols," Finance Research Letters, Elsevier, vol. 62(PB).

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    More about this item

    Keywords

    CEO pay disparity; Implied cost of equity capital; Chaebol; Outside director; Agency problem;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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