Journal of Financial and Quantitative Analysis Vol. 61 No. 3 2026

Market Feedback Effect on CEO Pay: Evidence from Peers’ Say-on-Pay Voting Failures

C. S. Agnes Cheng¹; Iftekhar Hasan²; Feng Tang³; Jing Xie⁴

¹ The University of Oklahoma Price College of Business Steed School of Accounting · ² Fordham University, Bank of Finland and University of Sydney · ³ University of Macau and Hang Seng University of Hong Kong · ⁴ University of Macau Department of Finance and Business Economics

Abstract

This article shows that when a compensation peer firm experiences a significant failure in its say-on-pay (SOP) voting, the focal firm’s stock price is adversely affected, resulting in reduced CEO pay in the subsequent period. This pay-reduction effect is amplified when the board is more powerful, when proxy advisors express concerns about CEO pay, and when the compensation consultant lacks quality. Directors who react to the price drop and cut the CEO’s pay receive higher votes in future director elections, implying a market feedback effect for directors of the focal firm triggered by their peers’ SOP voting failure.

DOI

10.1017/s0022109025102299

Volume

61

Issue

3

Pages

1348-1386

Language

en

Sources

openalex crossref

Cite

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