An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Mahmoud M. Nourayi
Loyola Marymount University

Steven M. Mintz
Cal Poly San Luis Obispo

Abstract: The Influence of Tenure and the Firm’s Performance on CEO’s Compensation

Abstract

The purpose of this study is to assess the influence of firms’ performance on CEOs’ cash and total compensation based on the length of tenure. We also examine pay-performance relationship for new CEOs versus those serving their last year in such position. The firm size appears to be a significant explanatory variable for CEOs’ cash and total compensation regardless of CEOs tenure and measure of performance. Additionally, firms’ performance is a significant determinant of cash compensation for CEOs during the first three years of their work as CEOs and not significant for those with 15 years or more as the company’s CEO. We also find evidence of ‘Big-bath Hypothesis’ based on the results that new CEOs’ total compensation is negatively correlated with performance measures and the magnitude of coefficient is larger and

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