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Say on pay laws, executive compensation, pay slice, and firm valuation around the world

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  • Correa, Ricardo
  • Lel, Ugur

Abstract

Using a large sample of firms from 38 countries over the 2001–2012 period, this study finds evidence that, following the adoption of say on pay (SoP) laws, chief executive officer (CEO) pay growth rates decline and the sensitivity of CEO pay to firm performance improves. These changes are concentrated in firms with high excess pay and shareholder dissent, long CEO tenure, and less independent boards. Further, the portion of top management pay captured by CEOs is lower in the post-SoP period, which is associated with higher firm valuations. Overall, these results suggest that SoP laws are associated with significant changes in CEO pay policies.

Suggested Citation

  • Correa, Ricardo & Lel, Ugur, 2016. "Say on pay laws, executive compensation, pay slice, and firm valuation around the world," Journal of Financial Economics, Elsevier, vol. 122(3), pages 500-520.
    • Handle: RePEc:eee:jfinec:v:122:y:2016:i:3:p:500-520
    DOI: 10.1016/j.jfineco.2016.09.003
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    More about this item

    Keywords

    Executive compensation; Say on pay laws; Regulations; CEO pay slice; Firm valuation;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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