Determinants of CEO Compensation

Abstract

Using a panel data analysis, the study explores the influence of size of a firm, firm-performance, Chief Executive Officer (CEO) duality and management pattern on CEO compensation. The final sample for the study comprises of a total of 300 Indian companies over a period of three years (2007-08 to 2009-10). The proposed relations are tested using the random-effects generalized least squares regression analysis. The age of the company and industry are introduced as the control variables. In conformity with the proposed hypotheses the analysis reveals that the size of the firm and the performance of the firm have a positive influence on firm performance. However, as regards the management pattern, the analysis reveals an inverse relationship. Further, no relationship is found between CEO duality and compensation. The findings of the study are discussed and implications for the managers are highlighted.