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  • The effect of say on pay on CEO compensation and spill-over effect on corporate cash holdings: Evidence from Australia

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    Accepted Manuscript (AM)
    Author(s)
    Atif, Muhammad
    Huang, Allen
    Liu, Benjamin
    Griffith University Author(s)
    Huang, Allen R.
    Liu, Benjamin
    Atif, Muhammad
    Year published
    2019
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    Abstract
    We examine the impact of Australia's Remuneration Amendment Act 2011 on CEO compensation and its spill-over effect on cash holdings to better understand how the new legislation affects the principal–agent relationship. Using a sample of ASX top 300 firms from 2004 to 2015, we find that the Act leads to more use of equity-based compensation. We also document that, after the introduction of the Act, CEO equity-based and total compensations are negatively related with cash holdings, i.e., more equity and total compensations lead to lower cash holdings (a spill-over effect), indicating alignment of the principal–agent interests. ...
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    We examine the impact of Australia's Remuneration Amendment Act 2011 on CEO compensation and its spill-over effect on cash holdings to better understand how the new legislation affects the principal–agent relationship. Using a sample of ASX top 300 firms from 2004 to 2015, we find that the Act leads to more use of equity-based compensation. We also document that, after the introduction of the Act, CEO equity-based and total compensations are negatively related with cash holdings, i.e., more equity and total compensations lead to lower cash holdings (a spill-over effect), indicating alignment of the principal–agent interests. Our results are robust to different estimation techniques. Our findings confirm that the Act is effective in driving a more efficient CEO pay strucure and provide important insights for the global discussion on compensation regulations.
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    Journal Title
    Pacific-Basin Finance Journal
    DOI
    https://doi.org/10.1016/j.pacfin.2019.01.001
    Copyright Statement
    © 2019 Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence (http://creativecommons.org/licenses/by-nc-nd/4.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, providing that the work is properly cited.
    Note
    This publication has been entered into Griffith Research Online as an Advanced Online Version
    Subject
    Accounting, Auditing and Accountability
    Banking, Finance and Investment
    Publication URI
    http://hdl.handle.net/10072/386790
    Collection
    • Journal articles

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