| dc.description.abstract | In this thesis, we have studied the role of CEO equity incentives in a payout decision, with a
focus on agency cost, among firms listed on the Oslo Stock Exchange from 2015 to 2020.
Firstly, we investigated the relationship between wealth performance sensitivity and total
payout among firms with high agency cost, before analysing the effect of CEO stock options
as a determinant of payout method, both in terms of propensity and level. Our first finding
indicates that CEO wealth-performance sensitivity significantly affects the propensity and
level of payouts for firms with high agency costs when agency cost is measured by low
ownership and investment opportunities. Thus, there is evidence suggesting that CEO
ownership incentives reduce agency costs. The effect is strongest for dividend payouts. We
fail to find supporting evidence for the effect of CEO options on the level or propensity of any
of the payout methods in contrast with other studies, especially from the US.
The key findings in the study are that the effect of CEO ownership incentive on payout
decisions depends on how you measure agency costs. Our study suggests that investment
opportunities are an accurate measure. Our research does not find an effect of CEO options on
payout policy and suggests that this relationship is dependent on conditions such as tax rate
and other market characteristics. In addition, it is challenging to distinguish the effect of the
different equity incentives from each other, which might contribute to lack of supporting
evidence. | en_US |
