CEO Compensation and Firm Performance: The Moderator Effects of Gender

Abstract

Abstract From the last century to the present, many scholars have been interested in the relationship between CEO compensation and firm performance. They study it from different levels and perspectives, such as company type, special market, industry or country, and have obtained many theoretical and empirical discoveries. While many findings have proven that CEO compensation would influence firm performance, the intervening system controlling this influence haven’t got enough largely unexplored. The purpose of this paper is attempting to unveil the secret of ”black box” between the relationship between CEO compensation and firm performance using the agency theory and empirically test the moderating effect of gender on this association. A panel data consist of 5258 observations during 2010 to 2019 based on samples of North America listed non-financial firms has been analyzed using Ordinary Least Squares regression (OLS) for interaction model and running baseline regression for two sub-samples (i.e. firms only with female CEO vs. firms only with male CEO) and full sample, with fundamental and market information from COMPUSTAT North America and EXECUCOMP database as a proxy for gender and CEO compensation. Moreover, I hypothesize that male CEO positively enhance the link for pay-performance. My findings based on samples collected from 5258 observations of North America listed non-financial firms revealed a positive relationship between CEO option awards and firm performance. At the same time, Results indicate that gender positively effect on CEO pay-performance depending on which male CEO’s compensation is examined because they are more overconfident and prefer taking risk