dc.contributor.authorGao, Huasheng
dc.contributor.authorHarford, Jarrad
dc.contributor.authorLi, Kai
dc.identifier.citationGao, H., Harford, J., & Li, K. (2012). CEO pay cuts and forced turnover: Their causes and consequences. Journal of corporate finance, 18(2), 291-310.en_US
dc.description.abstractWe study large discrete decreases in CEO pay and compare them to CEO forced turnover. The determinants are similar, as are the performance improvements after the action. After the pay cut, the CEO pay-for-performance sensitivity is abnormally high, such that the CEO can restore his pay level by reversing the poor performance. After either a pay cut or forced turnover, CEOs reduce investment and leverage, and improve performance, on average. Together, our results show that the possibility of these large compensation cuts provides ex ante incentives for CEOs to exert effort to avoid poor performance and that CEOs take actions to improve poor performance once pay is cut. The similarity of the causes and outcomes of large pay cuts compared to forced turnover suggests that large pay cuts are used as a substitute for forced turnover, helping to explain why forced turnover is rare.en_US
dc.relation.ispartofseriesJournal of corporate financeen_US
dc.subjectDRNTU::Business::Finance::Corporate finance
dc.titleCEO pay cuts and forced turnover: Their causes and consequencesen_US
dc.typeJournal Article
dc.contributor.schoolCollege of Business (Nanyang Business School)en_US

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