They would like to thank the anonymous referee and Andy Stark (editor) for helpful comments. Thanks also to Deloitte and Barclays Private Equity for financial support.
Executive Remuneration and Corporate Divestment: Motivating Managers to Make Unpalatable Decisions
Article first published online: 15 JUN 2007
Journal of Business Finance & Accounting
Volume 34, Issue 5-6, pages 792–818, June/July 2007
How to Cite
Haynes, M., Thompson, S. and Wright, M. (2007), Executive Remuneration and Corporate Divestment: Motivating Managers to Make Unpalatable Decisions. Journal of Business Finance & Accounting, 34: 792–818. doi: 10.1111/j.1468-5957.2007.02008.x
- Issue published online: 15 JUN 2007
- Article first published online: 15 JUN 2007
- (Paper received October 2004, revised version accepted October 2006. Online publication June 2007)
- executive remuneration;
- dynamic panel data
Abstract: This study examines the impact of voluntary divestment on executive remuneration, using an unbalanced panel of 107 UK quoted companies over the period 1988 to 1993. It employs a dynamic compensation equation, with a vector of controls and alternative specifications of the divestment effect. The results show no general direct evidence of a remuneration process that rewards managers for downsizing their firms. Indeed the substantial pay-size elasticity implies the reverse. However, divestment does have a positive and significant effect in raising executive remuneration under a regime of strong corporate governance, defined in terms of the presence of a substantial blockholder.