Using a broad sample of the largest European companies, I examine whether the two governance mechanisms, namely (i) independent monitoring by a board of directors and (ii) grants and disclosures of incentive-based executive pay, are substitutes for one another. I find that companies with proportionately more executives on their boards of directors grant greater incentive-based pay to their executives, and improve the transparency of their pay disclosure. The findings are consistent with the efficient contracting argument, which predicts that greater incentive-based pay and pay disclosure transparency mitigate agency problems generated by boards dependent upon management
| Identifer | oai:union.ndltd.org:MIT/oai:dspace.mit.edu:1721.1/4045 |
| Date | 06 February 2004 |
| Creators | Muslu, Volkan |
| Source Sets | M.I.T. Theses and Dissertation |
| Language | en_US |
| Detected Language | English |
| Type | Working Paper |
| Format | 282406 bytes, application/pdf |
| Relation | MIT Sloan School of Management Working Paper;4432-03 |
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