International Diversification, Industrial Diversification and Investment Opportunities Impact on CEO Long Term Compensation

• In Event: Accounting Behavior & Organization and Management Accounting

Abstract

The purpose of this research is to examine CEO long term compensation and to explore whether the independent variables (international diversification, industrial diversification, Investment Opportunities) are associated with CEO Long Term Compensation. Corporate diversification in this study is divided into international diversification and industrial diversification. Data for the study was obtained from annual reports of CEO salary on the ExecuComp database. Compensation data collected from the annual reports encompassed 2,448 CEOs from 1,622 firms. The dependent variable was developed from a review of CEO Long Term Compensation and accounting literature. The hypothesized predictors of CEO Long Term Compensation were identified through a review of existing studies. The results show that the higher degree of international diversification, and Investment Opportunities, the more CEOs receive in Long Term Compensation. In contrast, the higher the degree of industrial diversification, CEOs receive less levels of long-term compensation. These findings will help decision makers, such as boards of directors, investors, shareholders and CEOs, construct optimal compensation contracts and maximize shareholder wealth in the future.

Authors

• Hwei C Wang, University of Maryland Eastern Shore

• Wen-Wen Chien, SUNY-Old Westbury

• Chiulien Chuang Venezia, Frostburg State University