Abstract
The main purpose of this paper is to provide evidence on the effect of the Sarbanes-Oxley Act on stock ownership and the various measures of pay-performance sensitivity of CEOs' wealth. The Sarbanes-Oxley Act (SOX) provides a natural experiment for examining how stock ownership and executive pay structure adapt to a change in regulatory environment. Using annual compensation data of S&P 1,500 firms in 1994-2005, we examine the impact of SOX on stock ownership and pay-performance sensitivity of CEOs. Consistent with our expectations, we find that in light of SOX: (1) stock ownership and (2) the total pay-performance sensitivity of CEOs have decreased substantially, indicating that SOX induces a weaker incentive alignment between shareholders and CEOs. In contrast, we find that after SOX stock ownership and the total pay-performance sensitivity of CEOs have remained unchanged in the regulated industries.
| Original language | English |
|---|---|
| Peer-reviewed scientific journal | Review of Quantitative Finance and Accounting |
| Volume | 38 |
| Issue number | 2 |
| Pages (from-to) | 177-207 |
| Number of pages | 31 |
| ISSN | 0924-865X |
| DOIs | |
| Publication status | Published - 01.02.2012 |
| MoE publication type | A1 Journal article - refereed |
Keywords
- 511 Economics
- CEO
- Pay-performance sensitivity
- SOX
- Stock ownership