How does information asymmetry affect CEO compensation? - Evidence from US public firms

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dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en
dc.contributor.author Ruonala, Pinja
dc.date.accessioned 2016-06-14T06:01:04Z
dc.date.available 2016-06-14T06:01:04Z
dc.date.issued 2016
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/20699
dc.description.abstract This thesis aims to examine the relationship between firm performance, information asymmetry and CEO compensation. Prior academic research has not agreed on whether there exists a relationship between CEO pay and performance. Moreover, previous studies have not reached a consensus on the determinants of CEO compensation. Thus, this study contributes to the existing literature by examining the relationship between CEO pay and performance, and the effect that information asymmetry has on CEO pay and the pay for performance relationship. CEO compensation consists of several components. In this thesis, the relationship between firm performance and CEO pay, and the relationship between asymmetric information and CEO pay are investigated using different components of compensation in accordance with each research hypothesis. This research is conducted as a quantitative regression analysis. The research data consists of 11 539 firm-year observations of publicly listed US companies from the years 1993-2004. Pay for performance relationship is investigated by examining the effect of firm profitability on CEO total compensation. The effect of information asymmetry on CEO compensation is assessed by examining the relationship between a proxy variable for asymmetric information and the fixed salary component of CEO compensation. The effect of information asymmetry on pay for performance relationship is assessed by examining the relationship between CEO total compensation and an interaction variable consisting of the proxy variable for asymmetric information and the performance measure. Throughout the study I use accounting return on assets (ROA) as a measure of performance. The results give support to all three research hypotheses. I find that firm performance is positively related to CEO compensation. Further, my research results indicate that information asymmetry has a negative effect on both CEO total compensation and its salary component. Moreover, my findings also show that information asymmetry weakens the pay for performance relationship. en
dc.format.extent 55
dc.language.iso en en
dc.title How does information asymmetry affect CEO compensation? - Evidence from US public firms en
dc.type G2 Pro gradu, diplomityö fi
dc.contributor.school Kauppakorkeakoulu fi
dc.contributor.school School of Business en
dc.contributor.department Laskentatoimen laitos fi
dc.contributor.department Department of Accounting en
dc.subject.keyword agency theory
dc.subject.keyword asymmetric information
dc.subject.keyword CEO compensation
dc.subject.keyword performance
dc.identifier.urn URN:NBN:fi:aalto-201609083409
dc.type.dcmitype text en
dc.programme.major Laskentatoimi fi
dc.programme.major Accounting en
dc.type.ontasot Pro gradu tutkielma fi
dc.type.ontasot Master's thesis en
dc.subject.helecon laskentatoimi
dc.subject.helecon accounting
dc.subject.helecon johtaminen
dc.subject.helecon management
dc.subject.helecon johtajat
dc.subject.helecon managers
dc.subject.helecon palkka
dc.subject.helecon pay
dc.subject.helecon agentit
dc.subject.helecon agents
dc.subject.helecon tieto
dc.subject.helecon knowledge
dc.ethesisid 14374
dc.date.dateaccepted 2016-04-13
dc.location P1 I


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