TY - JOUR
T1 - Court intervention as a governance mechanism over CEO pay
T2 - evidence from the Citigroup derivative lawsuit
AU - Albuquerque, Ana M.
AU - Carter, Mary Ellen
AU - Lynch, Luann J.
N1 - Funding Information:
We gratefully acknowledge the financial support of Boston College, Boston University, and the University of Virginia Darden School Foundation. We appreciate the research assistance of Craig Tessiatore and Jon Ashley. We thank an anonymous reviewer, David Erkens, Yaniv Grin-stein, Justin Hopkins, Krish Menon, Susan Shu, Ewa Sletten, Anup Srivastava, and Jerry Zim-merman. We also appreciate the comments from seminar participants at Concordia University, Georgetown University, University of California at Berkeley, University of North Carolina at Charlotte, Portuguese Catholic University 2012 Accounting Conference, the American Accounting Association 2012 annual meeting, the 2013 American Accounting Association Management Accounting and Financial Reporting Section, the 2013 Ackerman Conference on Corporate Governance at Bar Ilan University.
Publisher Copyright:
© 2014 European Accounting Association.
Copyright:
Copyright 2015 Elsevier B.V., All rights reserved.
PY - 2015/10/2
Y1 - 2015/10/2
N2 - We use an unanticipated court ruling in a lawsuit against Citigroup claiming corporate waste related to CEO pay to analyse court intervention as an alternative governance mechanism in cases of excess pay. We find a negative relation between announcement returns and excess pay, consistent with shareholders of these firms perceiving court intervention as net costly. However, we find a positive relation between announcement returns and excess pay accompanied by poor performance, suggesting that intervention is welcome when pay is more egregious. Finally, we find that firms with excess pay and whose shareholders welcome intervention reduce future pay relative to other firms, suggesting that the threat of court intervention is a potential mechanism to control excess pay.
AB - We use an unanticipated court ruling in a lawsuit against Citigroup claiming corporate waste related to CEO pay to analyse court intervention as an alternative governance mechanism in cases of excess pay. We find a negative relation between announcement returns and excess pay, consistent with shareholders of these firms perceiving court intervention as net costly. However, we find a positive relation between announcement returns and excess pay accompanied by poor performance, suggesting that intervention is welcome when pay is more egregious. Finally, we find that firms with excess pay and whose shareholders welcome intervention reduce future pay relative to other firms, suggesting that the threat of court intervention is a potential mechanism to control excess pay.
UR - https://www.scopus.com/pages/publications/84943453297
U2 - 10.1080/09638180.2014.937348
DO - 10.1080/09638180.2014.937348
M3 - Article
AN - SCOPUS:84943453297
SN - 0963-8180
VL - 24
SP - 637
EP - 658
JO - European Accounting Review
JF - European Accounting Review
IS - 4
ER -