Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/7525
Title: Executive pay disparity and the cost of equity capital
Authors: Chen, Z
Huang, Y 
Wei, KCJ
Issue Date: 2013
Publisher: Cambridge Univ Press
Source: Journal of financial and quantitative analysis, 2013, v. 48, no. 3, p. 849-885 How to cite?
Journal: Journal of Financial and Quantitative Analysis 
Abstract: Executive pay disparity, as measured by chief executive officer (CEO) pay slice (CPS), is positively associated with the implied cost of equity, even after controlling for other determinants of the cost of equity. The difference in the cost of equity can explain 43%of the difference in the valuation effect attributable to CPS reported by Bebchuk, Cremers, and Peyer (2011). Further analysis shows that the positive association is stronger when agency problems of free cash flow are more severe and when CEO succession planning is more important. Our evidence suggests that a large CPS is associated with CEO entrenchment and high succession risk.
URI: http://hdl.handle.net/10397/7525
ISSN: 0022-1090
DOI: 10.1017/S0022109013000306
Appears in Collections:Journal/Magazine Article

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