Work

CEO remuneration, financial distress and firm life cycle

Year: 2023

Type: article

Abstract: This study investigates the association between CEO remuneration and firms' state of financial distress and whether that relationship varies systematically across firms' life cycle stages. Using a sample of 6508 firm-year observations over the 2004–2021 period, we find that a firm's state of financial distress is negatively related to CEO remuneration. We also find that this relationship holds in the mature and old stages of a firm life cycle, but not in the young phase. Our findings are consistent with the predictions of resource-based and efficient contracting theories, and are robust to endogeneity tests. Overall, our results show that CEO remuneration is a significant determinant of corporate financial distress.

Source: Pacific-Basin Finance Journal

DOI: 10.1016/j.pacfin.2023.102050

Authors: Bikram Chatterjee, Jing Jia, Mai Nguyen, Grantley Taylor, Lien Duong

Institutions: University of Tasmania, Curtin University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $2,480