We gratefully acknowledge financial support provided by both the Australian National University and the University of New South Wales. We also thank the following people for the useful comments and suggestions they provided in relation to the paper: Sudipto Dasgupta (the editor), an anonymous referee, Joseph Fan, Tom Smith, and participants at the 2006 AGSM Research Camp, the 2007 Asian Finance Association meeting and the 2007 China International Finance Conference. All remaining errors are our own.
Corporate Governance and the CEO Pay–Performance Link: Australian Evidence†
Article first published online: 16 APR 2013
© 2013 International Review of Finance Ltd. 2013
International Review of Finance
Volume 13, Issue 4, pages 447–472, December 2013
How to Cite
Schultz, E., Tian, G. Y. and Twite, G. (2013), Corporate Governance and the CEO Pay–Performance Link: Australian Evidence. International Review of Finance, 13: 447–472. doi: 10.1111/irfi.12012
- Issue published online: 5 DEC 2013
- Article first published online: 16 APR 2013
- Australian National University
- University of New South Wales
We examine the influence of corporate governance mechanisms, namely blockholdings and board structure, on CEO pay–performance sensitivity in listed Australian firms. Results highlight blockholders' role in shaping observed pay–performance associations and their impact varying with their independence and relative magnitude of ownership. Monitoring blockholders increase the sensitivity of long-term at-risk pay to performance, better aligning manager and shareholder interests. However, consistent with a shorter investment horizon, insider blockholders increase (decrease) the responsiveness of cash bonuses (long-term at-risk pay). Finally, consistent with them affording less-effective monitoring, larger boards raise (lower) the sensitivity of known pay (long-term at-risk pay) to performance.