Title

Moderators of the Relationship Between Director Stock-Based Compensation and Firm Performance

Department

Management & Entrepreneurship

Document Type

Article

Publication Date

11-2007

Abstract

Research on the efficacy of stock-based compensation for outside directors has documented a weak or non-existent relationship with firm performance. Other variables also influence the relationships between these two constructs. Consistent with agency theory, we show, for a sample of 450 Standard & Poor 500 firms over the 1995–97 period that the use of director stock options and grants ratios was more strongly associated with positive performance in firms with (a) higher investment opportunities, and (b) weaker external monitoring. These findings have implications for compensation committees in the structuring of director compensation.

Journal

Corporate Governance

Journal ISSN

0964-8410

Volume

15

Issue

6

First Page

1384

Last Page

1393

Digital Object Identifier (DOI)

10.1111/j.1467-8683.2007.00652.x