CEO Pay for Performance Sensitivity and Familial Relations: Type I versus Type II Agency Conflicts

• In Event: Family Owned Firms

Abstract

The CEO pay-performance sensitivity is higher for non-family firms with dispersed ownership than for family firms. The differences in type I and type II agency conflicts explain the results. Furthermore, the pay-performance sensitivity of professional CEOs in family firms is higher than the pay-performance sensitivity of family CEOs, because professional CEOs need their interests to be aligned with the ones of the dominant family. Finally, this work demonstrates that accounting performance is, on average, more important than stock market returns in setting the CEO pay for both family and non-family firms.

Author

• Daniele Macciocchi, LUISS Guido Carli University