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Effect of CEO-TMT pay ratio on the value of new product introductions

Author

Listed:
  • Prachi Gala
  • Saim Kashmiri
  • Cameron Nicol

Abstract

This study attempts to investigate the unexplored role played by a key corporate governance factor (CEO-TMT pay ratio) in explaining the variance in stock market response to new product introductions. Results of an event study support the authors' hypotheses that the stock market reacts less positively to announcements about new product introductions when the firms introducing these products have high CEO-TMT pay ratios. We also find that high advertising intensity and a history of many new product introductions tend to attenuate the negative impact of CEO-TMT pay ratio. A history of many corporate social concerns, however, tends to further strengthen this impact. These results have important implications for board members, investors, customers, compensation committee members, and scholars investigating the valuation of new product introductions.

Suggested Citation

  • Prachi Gala & Saim Kashmiri & Cameron Nicol, 2024. "Effect of CEO-TMT pay ratio on the value of new product introductions," International Journal of Corporate Governance, Inderscience Enterprises Ltd, vol. 14(4), pages 357-378.
    • Handle: RePEc:ids:ijcgov:v:14:y:2024:i:4:p:357-378
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