The material effects of CEO compensation : an empirical study of CEO compensation-effects and their relation to company fundamentals and turnover

Abstract

This thesis suggests that CEOs take actions to increase the short-term share price to improve conditions for equity sales and maximize their payout upon vesting. Vesting equity, my measure of short-term incentive, seems to have a positive association to the short-term actions imposed by share repurchases, acquisitions and dividend payments. The thesis also suggests that shorttermism does not materialize in cutting long-term investments. CEOs with an educational background from business and economics seem to understand the relationships investigated better and use them more frequently. Additionally, a high personal cost of leaving is negatively correlated with the probability of CEO turnover. Overall, by building on previous research, methodology and findings, this thesis suggests that CEO compensation has material effects on company fundamentals and turnover.