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link between CEO compensation, CEO resource allocation decisions, and firm performance

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Date Issued:
1994
Summary:
The relationship between the compensation (total and percent at risk) of 240 CEOs from 1986 to 1991, and several CEO resource allocation decisions (R&D, advertising, employees, business segments, and acquisitions) and subsequent firm performance was explored. The firms (Forbes-CEOs of the largest 800 public companies) had the same CEO for the entire period. The resource allocation decisions and the measures of firm performance (ROA, ROE, ROI, ROS, cashflow/sales, and stock return) were obtained from COMPUSTAT. The number of acquisitions was obtained from Mergers and Acquisitions. The percent of CEO compensation at risk was found to be associated with the change in R&D and the change in the number of business segments. Total CEO compensation was found to be positively associated with the change in advertising expenses, the change in the number of employees, and the change in the number of acquisitions. A principal components analysis indicated that the performance measures loaded on two factors, representing firm profitability and returns to stockholders. The relationship between CEO compensation and firm performance was explored using two stage simultaneous equations. The model considered the effects of prior firm performance on the relationship. The amount of total CEO compensation and the percent of CEO compensation at risk were found to be positively associated with subsequent firm profitability for several years. Total CEO compensation and the percent of CEO compensation at risk were positively associated with subsequent return to stockholders in one year. However, the results were not consistent across all the years of the study and the amounts of firm performance explained by the models were small.
Title: The link between CEO compensation, CEO resource allocation decisions, and firm performance.
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Name(s): Dahmus, Sue Ann.
Florida Atlantic University, Degree grantor
Golden, Peggy A., Thesis advisor
Type of Resource: text
Genre: Electronic Thesis Or Dissertation
Date Issued: 1994
Publisher: Florida Atlantic University
Place of Publication: Boca Raton, Fla.
Physical Form: application/pdf
Extent: 263 p.
Language(s): English
Summary: The relationship between the compensation (total and percent at risk) of 240 CEOs from 1986 to 1991, and several CEO resource allocation decisions (R&D, advertising, employees, business segments, and acquisitions) and subsequent firm performance was explored. The firms (Forbes-CEOs of the largest 800 public companies) had the same CEO for the entire period. The resource allocation decisions and the measures of firm performance (ROA, ROE, ROI, ROS, cashflow/sales, and stock return) were obtained from COMPUSTAT. The number of acquisitions was obtained from Mergers and Acquisitions. The percent of CEO compensation at risk was found to be associated with the change in R&D and the change in the number of business segments. Total CEO compensation was found to be positively associated with the change in advertising expenses, the change in the number of employees, and the change in the number of acquisitions. A principal components analysis indicated that the performance measures loaded on two factors, representing firm profitability and returns to stockholders. The relationship between CEO compensation and firm performance was explored using two stage simultaneous equations. The model considered the effects of prior firm performance on the relationship. The amount of total CEO compensation and the percent of CEO compensation at risk were found to be positively associated with subsequent firm profitability for several years. Total CEO compensation and the percent of CEO compensation at risk were positively associated with subsequent return to stockholders in one year. However, the results were not consistent across all the years of the study and the amounts of firm performance explained by the models were small.
Identifier: 12393 (digitool), FADT12393 (IID), fau:9292 (fedora)
Collection: FAU Electronic Theses and Dissertations Collection
Note(s): College of Business
Thesis (Ph.D.)--Florida Atlantic University, 1994.
Subject(s): Chief executive officers--Salaries, etc--United States
Executives--Salaries, etc--United States
Incentives in industry--United States
Executive ability
Industrial productivity--Evaluation
Held by: Florida Atlantic University Libraries
Persistent Link to This Record: http://purl.flvc.org/fcla/dt/12393
Sublocation: Digital Library
Use and Reproduction: Copyright © is held by the author, with permission granted to Florida Atlantic University to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Use and Reproduction: http://rightsstatements.org/vocab/InC/1.0/
Host Institution: FAU
Is Part of Series: Florida Atlantic University Digital Library Collections.