TY - JOUR
T1 - Local community's social capital and CEO pay duration
AU - Gu, Zhenjiang
AU - Kim, Jeong-Bon
AU - Lu, Louise Yi
AU - Yu, Yangxin
PY - 2024/10
Y1 - 2024/10
N2 - In this study, we examine the impact of social capital surrounding firms’ headquarters on their chief executive officers (CEOs)’ pay duration, reflected by the vesting periods of the short-term and long-term components in their annual compensation. Our analysis reveals that CEO pay duration increases with the level of social capital in the county in which firms are headquartered. We further find that this effect is more pronounced when CEOs are more likely to be short-term-oriented, suggesting that under the influence of the local community's social capital, the board of directors uses longer pay duration to better align CEOs’ interests with long-term shareholder value. Our results are robust to a variety of additional tests and a smaller sample of firms that had relocated their headquarters to communities with a different level of social capital. Overall, our findings are consistent with the view that social capital incentivizes firms to be long-term-oriented and refrain from short-term opportunistic activities, and this lengthens CEO pay duration. © 2024 John Wiley & Sons Ltd.
AB - In this study, we examine the impact of social capital surrounding firms’ headquarters on their chief executive officers (CEOs)’ pay duration, reflected by the vesting periods of the short-term and long-term components in their annual compensation. Our analysis reveals that CEO pay duration increases with the level of social capital in the county in which firms are headquartered. We further find that this effect is more pronounced when CEOs are more likely to be short-term-oriented, suggesting that under the influence of the local community's social capital, the board of directors uses longer pay duration to better align CEOs’ interests with long-term shareholder value. Our results are robust to a variety of additional tests and a smaller sample of firms that had relocated their headquarters to communities with a different level of social capital. Overall, our findings are consistent with the view that social capital incentivizes firms to be long-term-oriented and refrain from short-term opportunistic activities, and this lengthens CEO pay duration. © 2024 John Wiley & Sons Ltd.
KW - CEO pay duration
KW - executive compensation
KW - social capital
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UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-85181500252&origin=recordpage
U2 - 10.1111/jbfa.12781
DO - 10.1111/jbfa.12781
M3 - RGC 21 - Publication in refereed journal
SN - 0306-686X
VL - 51
SP - 2304
EP - 2335
JO - Journal of Business Finance & Accounting
JF - Journal of Business Finance & Accounting
IS - 9-10
ER -