The purpose of this paper is to contribute to the research area on the connection between CEO compensation and institutional and foreign ownership using data on Swedish firms. We study the level of pay and performance-based compensation as well as probe further into determinants of CEO compensation in Sweden. We do not find support for an effect of institutional and foreign investors for the level of compensation or performance-based compensation. However, we find results supporting an effect of a subgroup of institutional owners on CEO compensation. Our results also show that firm size and growth opportunities are the most important factors in explaining CEO compensation in Swedish listed firms. Furthermore, we find interesting initial results suggesting that CEO ownership may also be an important factor in explaining CEO compensation.
Contents
1. INTRODUCTION
2. THEORETICAL FRAMEWORK AND PREVIOUS RESEARCH
2.1 THEORIES ON CEO COMPENSATION CONTRACTING
2.1.1 Agency Theory
2.1.2 New Approach to Agency Theory
2.2 LEVEL OF COMPENSATION
2.3 PERFORMANCE-BASED COMPENSATION
3. METHOD
3.1 BACKGROUND
3.2 METHODOLOGY
3.2.1 Level of Compensation
3.2.2 Performance-Based Compensation
4. MODEL AND HYPOTHESIS
4.1 MODELS
4.2 EXPLANATORY VARIABLES
4.2.1 Presence of an Institutional of Foreign Owner
4.2.2 Firm Size
4.2.3 Performance
4.2.4 Growth Opportunities
4.2.5 Identity of the Largest Owner
4.2.6 Industry
4.2.7 Additional and Alternative Variables
4.2.8 Robustness Verification
4.3 HYPOTHESIS
5. DATA AND SUMMARY STATISTICS
5.1 COMPENSATION DATA
5.2 OWNERSHIP DATA
5.3 FIRM SIZE
5.4 PERFORMANCE
5.5 GROWTH OPPORTUNITIES
5.6 INDUSTRY
5.7 ADDITIONAL AND ALTERNATIVE VARIABLES
5.7.1 Board Compensation
5.7.2 AP Funds
5.7.3 Ownership and Performance
5.7.4 CEO Ownership
6. RESULTS
6.1 LEVEL OF COMPENSATION
6.1.1 Level of Compensation for the Investigated Years
6.1.2 Change in Ownership and Compensation
6.2 PERFORMANCE-BASED COMPENSATION
6.3 ADDITIONAL AND ALTERNATIVE VARIABLES
6.3.1 The Board of Directors
6.3.2 AP Funds
6.3.3 Ownership and Performance
6.3.4 CEO Ownership
7. DISCUSSION
7.1 LEVEL OF COMPENSATION
7.2 PERFORMANCE-BASED COMPENSATION
7.3 CONTROL VARIABLES
7.4 ADDITIONAL AND ALTERNATIVE VARIABLES
7.4.1 The Board of Directors
7.4.2 AP Funds
7.4.3 Ownership and Performance
7.4.4 CEO Ownership
8. CONCLUSION
9. SUGGESTIONS FOR FUTURE RESEARCH
10. REFERENCES
11. APPENDIX
Author: Alexandra Forbes, Bianca de Pourbaix
Source: Stockholm School of Economics