CEO compensation and firm performance : the mediating effects of CEO risk taking behaviour

Hussam A. Al-Shammari

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.

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Year of publication:	2021
Authors:	Al-Shammari, Hussam A.
Published in:	Cogent business & management. - London : Taylor & Francis, ISSN 2331-1975, ZDB-ID 2837523-3. - Vol. 8.2021, 1, Art.-No. 1894893, p. 1-19
Subject:	CEO compensation \| risk-taking behavior \| firm performance \| agency theory \| expectancy theor \| Führungskräfte \| Managers \| Unternehmenserfolg \| Firm performance \| Prinzipal-Agent-Theorie \| Agency theory \| Managervergütung \| Executive compensation \| Risikopräferenz \| Risk attitude \| Leistungsentgelt \| Performance pay \| Vergütungssystem \| Compensation system

Type of publication:	Article
Type of publication (narrower categories):	Aufsatz in Zeitschrift ; Article in journal
Language:	English
Other identifiers:	10.1080/23311975.2021.1894893 [DOI] hdl:10419/270240 [Handle]
Source:	ECONIS - Online Catalogue of the ZBW

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