Investors Reaction to the Disclosure of CEO Compensation

Subject Areas : Journal of Investment Knowledge

faezah Gholami Moghaddam ¹ , Javad Rajabalizadeh ² , Reza Hesarzadeh ³

1 - MSc. in Acconting
2 - MSc. in Auditing
3 - Assistant Prof., Faculty of Economic and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

Received: 2018-02-19 Accepted : 2018-06-19 Published : 2020-04-20

Keywords: Fairness of Compensation, Ability to Attract talented Managers, Compensation Ratio, Perceived Investors, CEO Compensation,

Abstract :

In recent years, increasing conflicts agencies have caused legislators impose stricter requirements on executive compensation disclosure. However, theoretically and experimentally, compensation disclosure is one of the challenging issue. The porpuse of this study is to investigate investors reaction to chief executive officer (CEO) compensation disclosure. Therefore, the present study by using the framework of the Kelly and Seow (2016), investigetes investors reaction to evaluate different scenarios. In this regard, three types of questionnaires were issued with the disclosure criteria of managers' bonuses, disclosure of high compensation to managers, and disclosure of the rewards ratio of managers to employees and the survey of 225 students of financial sciences was an indicator for the investor. Results show that the executive compensation disclosure to employee receive with executive compensation disclosure in similar firms is better than the other scenarios. Because this scenario have positive effect on investor perception of "fairness compensation, the company's ability to attract and retain the CEO and potential investment opportunities".

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