Journal of Financial Economics Vol. 107 No. 2 2013

CEO compensation contagion: Evidence from an exogenous shock

Fred Bereskin¹; David C. Cicero^2,3

¹ University of Delaware · ² University of Tennessee at Knoxville · ³ Knoxville College

Abstract

We examine how Chief Executive Officer (CEO) compensation increased at a subset of firms in response to a governance shock that affected compensation levels at other firms in the economy. We first show that Delaware-incorporated firms with staggered boards and no outside blockholders increased CEO compensation following the mid-1990s Delaware legal cases that strengthened their ability to resist hostile takeovers. Consistent with the Gabaix and Landier (2008) contagion hypothesis, non-Delaware firms subsequently increased CEO compensation when the rulings affected a substantial number of firms in their industries. We further show how these legal developments contributed significantly to the rapid increase in CEO compensation in the late 1990s.

DOI

10.1016/j.jfineco.2012.09.005

Volume

107

Issue

2

Pages

477-493

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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