Cash Versus Equity In CEO Compensation
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The aim of this study is to examine the relative importance of cash compensation in CEO compensation package. Building on the multiple theoretical perspectives regarding the cash compensation, this paper empirically uncovers possible variations in the proportion of cash compensation to total compensation. Using a cross-section data of 2,257 publicly traded firms in the U.S., evidence of between-firm variations of cash compensation suggests that a greater reliance on cash compensation can be predicted by easiness of monitoring, growth opportunities, and large CEO share holdings. Overall, these findings indicate that, in certain situations where agency problems are less severe, firms tend to rely more on cash pay.
Abstract
The aim of this study is to examine the relative importance of cash compensation in CEO compensation package. Building on the multiple theoretical perspectives regarding the cash compensation, this paper empirically uncovers possible variations in the proportion of cash compensation to total compensation. Using a cross-section data of 2,257 publicly traded firms in the U.S., evidence of between-firm variations of cash compensation suggests that a greater reliance on cash compensation can be predicted by easiness of monitoring, growth opportunities, and large CEO share holdings. Overall, these findings indicate that, in certain situations where agency problems are less severe, firms tend to rely more on cash pay.
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