Institutional investors’ monitoring attention, CEO compensation, and relative performance evaluation

Cai Liu; Chao Yin

doi:10.1016/j.frl.2023.104121

Institutional investors’ monitoring attention, CEO compensation, and relative performance evaluation

Cai Liu^*, Chao Yin

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

This paper examines whether the monitoring attention of institutional investors can influence CEO compensation. We find that higher motivated monitoring institutional ownership (IO) is associated with higher pay-performance-sensitivity of CEO compensation. Further, we find that only institutional investors with very high monitoring attention can positively affect the pay-performance-sensitivity. Finally, we document that CEO pay-performance-sensitivity is more, if not only, related to the unsystematic component of corporate performance in firms with higher monitoring IO.

Original language	English
Article number	104121
Pages (from-to)	1-13
Number of pages	13
Journal	Finance Research Letters
Volume	56
Early online date	16 Jun 2023
DOIs	https://doi.org/10.1016/j.frl.2023.104121
Publication status	Published - Sept 2023

Keywords / Materials (for Non-textual outputs)

CEO compensation
institutional investor
monitoring attention
relative performance evaluation

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10.1016/j.frl.2023.104121

LiuCYinC2023FRLInstitutionalInvestors'MonitoringAttentionAccepted author manuscript, 695 KBLicence: Creative Commons: Attribution (CC-BY)

Cite this

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abstract = "This paper examines whether the monitoring attention of institutional investors can influence CEO compensation. We find that higher motivated monitoring institutional ownership (IO) is associated with higher pay-performance-sensitivity of CEO compensation. Further, we find that only institutional investors with very high monitoring attention can positively affect the pay-performance-sensitivity. Finally, we document that CEO pay-performance-sensitivity is more, if not only, related to the unsystematic component of corporate performance in firms with higher monitoring IO.",

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KW - relative performance evaluation

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Institutional investors’ monitoring attention, CEO compensation, and relative performance evaluation

Abstract

Keywords / Materials (for Non-textual outputs)

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