IDEAS home Printed from https://ideas.repec.org/p/hhb/lufewp/2002_004.html
   My bibliography  Save this paper

The Effect of Internationalization On CEO-Compensation

Author

Listed:
  • Oxelheim, Lars

    (Department of Business Administration, School of Economics and Management, Lund University)

  • Randøy, Trond

    (School of management Agder University College)

Abstract

This study addresses how firms’ internationalization affects CEO compensation. Based on a sample of Swedish listed firms we analyze the effect of internationalization through the product market (export), the capital market (foreign exchange listing), and the corporate governance market (foreign board membership). We find that internationalization with respect to the capital market and the corporate governance market strengthens the relationship between product market internationalization and CEO compensation. A higher degree of internationalization - via the capital and corporate governance markets - is found to be associated with shorter CEO tenure. We argue that part of the higher CEO compensation in international oriented firms reflects a risk premium for harsher monitoring and thus lower job security.

Suggested Citation

  • Oxelheim, Lars & Randøy, Trond, 2002. "The Effect of Internationalization On CEO-Compensation," Working Paper Series 2002/4, Lund University, Institute of Economic Research.
    • Handle: RePEc:hhb:lufewp:2002_004
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Farok J Contractor & Sumit K Kundu & Chin-Chun Hsu, 2003. "A three-stage theory of international expansion: the link between multinationality and performance in the service sector," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(1), pages 5-18, January.
    2. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58, January.
    3. Morck, Randall & Yeung, Bernard, 1991. "Why Investors Value Multinationality," The Journal of Business, University of Chicago Press, vol. 64(2), pages 165-187, April.
    4. Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004. "Why are foreign firms listed in the U.S. worth more?," Journal of Financial Economics, Elsevier, vol. 71(2), pages 205-238, February.
    5. Paul Gregg & Stephen Machin & Stefan Szymanski, 1993. "The Disappearing Relationship Between Directors' Pay and Corporate Performance," British Journal of Industrial Relations, London School of Economics, vol. 31(1), pages 1-9, March.
    6. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
    7. repec:fth:michin:282 is not listed on IDEAS
    8. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    9. Murphy, Kevin J., 2000. "Performance standards in incentive contracts," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 245-278, December.
    10. Core, John E. & Holthausen, Robert W. & Larcker, David F., 1999. "Corporate governance, chief executive officer compensation, and firm performance," Journal of Financial Economics, Elsevier, vol. 51(3), pages 371-406, March.
    11. Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
    12. Miller, Darius P., 1999. "The market reaction to international cross-listings:: evidence from Depositary Receipts," Journal of Financial Economics, Elsevier, vol. 51(1), pages 103-123, January.
    13. David M Reeb & Chuck C Y Kwok & H Young Baek, 1998. "Systematic Risk of the Multinational Corporation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(2), pages 263-279, June.
    14. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    15. Howe, John S. & Madura, Jeff, 1990. "The impact of international listings on risk : Implications for capital market integration," Journal of Banking & Finance, Elsevier, vol. 14(6), pages 1133-1142, December.
    16. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    17. Brian J. Hall & Jeffrey B. Liebman, 1998. "Are CEOs Really Paid Like Bureaucrats?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 653-691.
    18. Randøy, Trond & Oxelheim, Lars & Stonehill, Arthur, 2001. "Corporate Financial Strategies for Global Competitiveness," European Management Journal, Elsevier, vol. 19(6), pages 659-669, December.
    19. Sloan, Richard G., 1993. "Accounting earnings and top executive compensation," Journal of Accounting and Economics, Elsevier, vol. 16(1-3), pages 55-100, April.
    20. Brian K. Boyd, 1994. "Board control and ceo compensation," Strategic Management Journal, Wiley Blackwell, vol. 15(5), pages 335-344, June.
    21. Robert M Grant, 1987. "Multinationality and Performance among British Manufacturing Companies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 18(3), pages 79-89, September.
    22. Oxelheim, Lars & Randoy, Trond, 2003. "The impact of foreign board membership on firm value," Journal of Banking & Finance, Elsevier, vol. 27(12), pages 2369-2392, December.
    23. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    24. Martin Conyon & Simon Peck, 1998. "Board size and corporate performance: evidence from European countries," The European Journal of Finance, Taylor & Francis Journals, vol. 4(3), pages 291-304.
    25. Marco Becht & Fabrizio Barca, 2001. "The control of corporate Europe," ULB Institutional Repository 2013/13302, ULB -- Universite Libre de Bruxelles.
    26. Dawn Harris & Constance Helfat, 1997. "Specificity of CEO human capital and compensation," Strategic Management Journal, Wiley Blackwell, vol. 18(11), pages 895-920, December.
    27. Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Second Edition," NBER Books, National Bureau of Economic Research, Inc, number beck75-1.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vicente Cuñat & Maria Guadalupe, 2005. "How Does Product Market Competition Shape Incentive Contracts?," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1058-1082, September.
    2. Arpita Agnihotri & Saurabh Bhattacharya, 2019. "CEO Narcissism and Internationalization by Indian Firms," Management International Review, Springer, vol. 59(6), pages 889-918, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mäkinen, Mikko, . "Essays on Stock Option Schemes and CEO Compensation," ETLA A, The Research Institute of the Finnish Economy, number 42, June.
    2. Renneboog, L.D.R. & Trojanowski, G., 2002. "The Managerial Labor Market and the Governance Role of Shareholder Control Structures in the UK," Discussion Paper 2002-68, Tilburg University, Center for Economic Research.
    3. Muurling, Rutger & Lehnert, Thorsten, 2004. "Option-based compensation: a survey," The International Journal of Accounting, Elsevier, vol. 39(4), pages 365-401.
    4. Bushman, Robert M. & Smith, Abbie J., 2001. "Financial accounting information and corporate governance," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 237-333, December.
    5. Li, Donghui & Moshirian, Fariborz & Nguyen, Pascal & Tan, Liwen, 2007. "Corporate governance or globalization: What determines CEO compensation in China?," Research in International Business and Finance, Elsevier, vol. 21(1), pages 32-49, January.
    6. Hearn, Bruce, 2014. "Institutional impact on the expropriation of private benefits of control in North Africa," Research in International Business and Finance, Elsevier, vol. 30(C), pages 1-23.
    7. Oxelheim, Lars & Randøy, Trond, 2013. "Globalization of monitoring practices: The case of American influences on the dismissal risk of European CEOs," Journal of Economics and Business, Elsevier, vol. 70(C), pages 3-15.
    8. Manika Kohli, 2018. "Impact of Ownership Type and Board Characteristics on the Pay–Performance Relationship: Evidence from India," Indian Journal of Corporate Governance, , vol. 11(1), pages 1-34, June.
    9. Jesper Banghøj & Gorm Gabrielsen & Christian Petersen & Thomas Plenborg, 2010. "Determinants of executive compensation in privately held firms," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(3), pages 481-510, September.
    10. Trond Randøy & Jim Nielsen, 2002. "Company Performance, Corporate Governance, and CEO Compensation in Norway and Sweden," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 6(1), pages 57-81, March.
    11. Hearn, Bruce, 2013. "The impact of board governance on director compensation in West African IPO firms," Research in International Business and Finance, Elsevier, vol. 28(C), pages 82-104.
    12. Premepeh, kwadwo Boateng & Odartei-Mills, Eugene, 2015. "Corporate governance structure and shareholder wealth maximisation," MPRA Paper 68087, University Library of Munich, Germany.
    13. Ji, Jiao & Talavera, Oleksandr & Yin, Shuxing, 2016. "CEO Dismissal, Compensation and Topics of Board Meetings: The Case of China," MPRA Paper 70232, University Library of Munich, Germany.
    14. Naeem Tabassum & Satwinder Singh, 2020. "Corporate Governance and Organisational Performance," Springer Books, Springer, number 978-3-030-48527-6, June.
    15. He, Yan & Chiu, Yung-ho & Zhang, Bin, 2015. "The impact of corporate governance on state-owned and non-state-owned firms efficiency in China," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 252-277.
    16. Muhammad Haris & Hongxing Yao & Gulzara Tariq & Hafiz Mustansar Javaid & Qurat Ul Ain, 2019. "Corporate Governance, Political Connections, and Bank Performance," IJFS, MDPI, vol. 7(4), pages 1-37, October.
    17. Goh, Lisa & Gupta, Aditi, 2016. "Remuneration of non-executive directors: Evidence from the UK," The British Accounting Review, Elsevier, vol. 48(3), pages 379-399.
    18. Paolo Roffia & Virginia Simón-Moya & Javier Sendra García, 2022. "Board of director attributes: effects on financial performance in SMEs," International Entrepreneurship and Management Journal, Springer, vol. 18(3), pages 1141-1172, September.
    19. Martin Bugeja & Stephanie Fohn & Zoltan Matolcsy & Neil Fargher, 2016. "Determinants of the levels and changes in non-executive director compensation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(3), pages 627-667, September.
    20. Theeravanich, Amnaj, 2013. "Director compensation in emerging markets: A case study of Thailand," Journal of Economics and Business, Elsevier, vol. 70(C), pages 71-91.

    More about this item

    Keywords

    CEO compensation; internationalization; corporate governance; Sweden;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

    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:hhb:lufewp:2002_004. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Elsbeth Andersson (email available below). General contact details of provider: https://edirc.repec.org/data/ielunse.html .

    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.