Speculative Markets and CEO Compensation

Mahmoud M. Nourayi, Loyola Marymount University

ABSTRACT. This study examines CEO compensation of over the period of 1996-2002 with respect to changes in the structure of relationship between the compensation and size and performance of US companies. The US stock market has arguably been undergoing a “Speculative Bubble” followed by a sharp decline in equity prices during the period of this study. This period has also been associated with the practices characterized as “Excessive Growth in CEO Pay” and the quality of executive contracting process for public companies. The results of this study indicate that CEO compensation have been structured differently after 1999 with respect to both size and performance measures. These changes seem to have affected contracts CEOs of the “New-Economy” firms as well as other firms. The results show The impact of size and performance on the CEO compensation has changed over the period with the year 2000 as the transition year.

Keyword: CEO Compensation, Speculative Market, New Economy, Structural

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