Work

Agency Theory Revisited: CEO Returns and Shareholder Interest Alignment

Year: 2009

Type: preprint

Abstract: Agency theory suggests that there may be managerial mischief when the interests of owners and managers (agents) diverge; one possible solution to this agency problem is the alignment of owner and agent interests through agent compensation and equity ownership. We develop the theoretical concept of CEO returns, and empirically estimate the magnitude of financial alignment, as measured by the relationship between CEO returns and shareholder returns. Our results, based on this new conceptualization and corresponding measurement, suggest stronger alignment than reported in previous work. We find that the magnitude of this alignment relationship plays a positive role in predicting subsequent firm performance; however, it does so in ways not clearly articulated or tested in prior CEO compensation research.

Source: SSRN Electronic Journal

Authors: Anthony J. Nyberg, Ingrid Smithey Fulmer, Barry Gerhart, Mason A. Carpenter

Institutions: University of South Carolina, Rutgers, The State University of New Jersey, University of Wisconsin–Madison

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2015109296

Cites: 89

Cited by: 25

Related to: 10