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The effect of say on pay on CEO compensation and spill-over effect on corporate cash holdings: Evidence from Australia

Atif, Muhammad and Huang, Allen and Liu, Benjamin (2019) 'The effect of say on pay on CEO compensation and spill-over effect on corporate cash holdings: Evidence from Australia.' Pacific-Basin Finance Journal. ISSN 0927-538X

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Abstract

We examine the impact of Australia's Remuneration Amendment Act 2011 on CEO compensation and its spill-over effect on cash holdings to better understand how the new legislation affects the principal–agent relationship. Using a sample of ASX top 300 firms from 2004 to 2015, we find that the Act leads to more use of equity-based compensation. We also document that, after the introduction of the Act, CEO equity-based and total compensations are negatively related with cash holdings, i.e., more equity and total compensations lead to lower cash holdings (a spill-over effect), indicating alignment of the principal–agent interests. Our results are robust to different estimation techniques. Our findings confirm that the Act is effective in driving a more efficient CEO pay strucure and provide important insights for the global discussion on compensation regulations.

Item Type: Article
Uncontrolled Keywords: Corporate governance, Say on pay, CEO compensation, Cash holdings
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Accounting Centre
Depositing User: Elements
Date Deposited: 19 Jul 2019 15:05
Last Modified: 19 Jul 2019 15:15
URI: http://repository.essex.ac.uk/id/eprint/24998

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