CEO compensation and firm performance: The mediating effects of CEO risk taking behaviour
While CEO compensation is seen as influencing firm performance, the intervening mechanisms that govern this influence have remained largely unexplored. Using the agency and expectancy theories, this paper attempts to open the “black box” between CEO compensation and firm performance and empirically...
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Taylor & Francis Group
2021
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oai:doaj.org-article:83e93e9d87d94dffa141619d55ee3f7f2021-12-02T18:21:19ZCEO compensation and firm performance: The mediating effects of CEO risk taking behaviour2331-197510.1080/23311975.2021.1894893https://doaj.org/article/83e93e9d87d94dffa141619d55ee3f7f2021-01-01T00:00:00Zhttp://dx.doi.org/10.1080/23311975.2021.1894893https://doaj.org/toc/2331-1975While CEO compensation is seen as influencing firm performance, the intervening mechanisms that govern this influence have remained largely unexplored. Using the agency and expectancy theories, this paper attempts to open the “black box” between CEO compensation and firm performance and empirically tests the intervening effect of CEO risk-taking behavior on this relationship. Specifically, we hypothesize that CEO compensation indirectly influences firm performance through its direct effects on CEO risk-taking behavior. Results based on data collected from 204 U.S. manufacturing firms revealed a strong, positive relationship between CEO option pay and a firm’s strategic risk, stock returns risk, and income stream risk. Results also showed that firm strategic risk, measured by R&D expenditure, mediates the CEO option pay-firm performance relationship, sometimes fully and sometimes partially, depending on which type of performance is being examined.Hussam A. Al-ShammariTaylor & Francis Grouparticleceo compensationrisk-taking behaviorfirm performanceagency theoryexpectancy theorBusinessHF5001-6182Management. Industrial managementHD28-70ENCogent Business & Management, Vol 8, Iss 1 (2021) |
| institution |
DOAJ |
| collection |
DOAJ |
| language |
EN |
| topic |
ceo compensation risk-taking behavior firm performance agency theory expectancy theor Business HF5001-6182 Management. Industrial management HD28-70 |
| spellingShingle |
ceo compensation risk-taking behavior firm performance agency theory expectancy theor Business HF5001-6182 Management. Industrial management HD28-70 Hussam A. Al-Shammari CEO compensation and firm performance: The mediating effects of CEO risk taking behaviour |
| description |
While CEO compensation is seen as influencing firm performance, the intervening mechanisms that govern this influence have remained largely unexplored. Using the agency and expectancy theories, this paper attempts to open the “black box” between CEO compensation and firm performance and empirically tests the intervening effect of CEO risk-taking behavior on this relationship. Specifically, we hypothesize that CEO compensation indirectly influences firm performance through its direct effects on CEO risk-taking behavior. Results based on data collected from 204 U.S. manufacturing firms revealed a strong, positive relationship between CEO option pay and a firm’s strategic risk, stock returns risk, and income stream risk. Results also showed that firm strategic risk, measured by R&D expenditure, mediates the CEO option pay-firm performance relationship, sometimes fully and sometimes partially, depending on which type of performance is being examined. |
| format |
article |
| author |
Hussam A. Al-Shammari |
| author_facet |
Hussam A. Al-Shammari |
| author_sort |
Hussam A. Al-Shammari |
| title |
CEO compensation and firm performance: The mediating effects of CEO risk taking behaviour |
| title_short |
CEO compensation and firm performance: The mediating effects of CEO risk taking behaviour |
| title_full |
CEO compensation and firm performance: The mediating effects of CEO risk taking behaviour |
| title_fullStr |
CEO compensation and firm performance: The mediating effects of CEO risk taking behaviour |
| title_full_unstemmed |
CEO compensation and firm performance: The mediating effects of CEO risk taking behaviour |
| title_sort |
ceo compensation and firm performance: the mediating effects of ceo risk taking behaviour |
| publisher |
Taylor & Francis Group |
| publishDate |
2021 |
| url |
https://doaj.org/article/83e93e9d87d94dffa141619d55ee3f7f |
| work_keys_str_mv |
AT hussamaalshammari ceocompensationandfirmperformancethemediatingeffectsofceorisktakingbehaviour |
| _version_ |
1718378165883109376 |