Relationship between CEO pay and total shareholder return: An empirical analysis in the Italian context

Abstract

This study examines the relationship between CEO Pay and total shareholder return, using data between 2008-2014 from Italian listed firms (FTSE MIB). We perform panel data regression analysis of CEO compensation on financial performance, and in this way we refer to research made by Gigliotti (2013), but we extend it considering the Total Shareholder Return instead of accounting based performance. TSR has become a crucial measure in a pay-for-performance approach for different reasons. Our results indicate that there is not a significant relationship between CEO compensation and corporate performance during 2008-2014. These results contribute to our understanding of the pay for performance mechanism in times of financial disturbance, highly relevant to the existing debate considering CEO compensation.