Executive compensation in less regulated markets: the impact of debt monitoring

Research output: Contribution to journalArticle

Abstract

This paper shows that in the lightly regulated Alternative Investment Market (AIM) voluntary corporate board structures might not reduce agency costs between shareholder and executive directors. In this less regulated market we find that the extent of debt affects executive pay. Also the theoretical determinants of executive pay affect CEO and other executives' pay and incentives differently in this market. We find no evidence that debt levels affect CEO pay in a matched sample of Main Market firms. Our results suggest that debtholders could be better monitors of executive directors' actions, in comparison to voluntary governance committees in less regulated markets.
LanguageEnglish
Number of pages56
JournalEuropean Journal of Finance
Publication statusAccepted/In press - 24 Jun 2019

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Debt
Executive compensation
Monitoring
Executive pay
Governance
Chief executive officer
Shareholders
Board structure
Alternative investments
Incentives
CEO pay
Agency costs
Corporate boards

Keywords

  • debt monitoring
  • corporate governance
  • board structures
  • executive compensation
  • executive incentives
  • less regulated markets

Cite this

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title = "Executive compensation in less regulated markets: the impact of debt monitoring",
abstract = "This paper shows that in the lightly regulated Alternative Investment Market (AIM) voluntary corporate board structures might not reduce agency costs between shareholder and executive directors. In this less regulated market we find that the extent of debt affects executive pay. Also the theoretical determinants of executive pay affect CEO and other executives' pay and incentives differently in this market. We find no evidence that debt levels affect CEO pay in a matched sample of Main Market firms. Our results suggest that debtholders could be better monitors of executive directors' actions, in comparison to voluntary governance committees in less regulated markets.",
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AB - This paper shows that in the lightly regulated Alternative Investment Market (AIM) voluntary corporate board structures might not reduce agency costs between shareholder and executive directors. In this less regulated market we find that the extent of debt affects executive pay. Also the theoretical determinants of executive pay affect CEO and other executives' pay and incentives differently in this market. We find no evidence that debt levels affect CEO pay in a matched sample of Main Market firms. Our results suggest that debtholders could be better monitors of executive directors' actions, in comparison to voluntary governance committees in less regulated markets.

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KW - executive incentives

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