Determinants of director compensation: evidence from Norway : an empirical study of Norwegian companies from 2004 to 2016

Abstract

Building on a comprehensive data set containing financial data on Norwegian companies from 2004 to 2016 combined with a database on all individuals holding directorships in the same period, this thesis investigates the level of director compensation in the Norwegian business environment. We draw upon agency theory, resource dependence theory and related literature to construct an extensive research model including firm characteristics, corporate performance, board characteristics, ownership structure, and gender diversity. We control for unobserved heterogeneity by employing a two-way fixed effects model, and detect a positive relationship between the level of director compensation and a firm’s complexity. Moreover, our evidence suggest the relationship is negative for a firm’s leverage ratio as well as the size of the board. Lastly, we provide novel evidence of a positive relationship between holding multiple directorships and the level of compensation. However, we are not able to identify any significant relationship between the level of director compensation and a firm’s performance, a well-documented relationship internationally. Neither do we find evidence of gender diversity of the board and management to affect director compensation over the sample period, but some weak evidence of a positive relationship before the introduction of a gender quota on boards in 2008.