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Incentive Contracts and Stockholder Monitoring: Substitute Sources of Executive Compliance

Douglas, Evan J. & Santerre, Rexford E. (1990) Incentive Contracts and Stockholder Monitoring: Substitute Sources of Executive Compliance. Quarterly Review of Economics and Business, 30(2), pp. 24-31.

Abstract

The inverse relationship between stockholder concentration and executive compensation reflects the reduced asymmetry of information that accompanies greater stockholder concentration. Using a sample of firms with separate salary and bonus data for the CEO, we find stockholder control to be a highly significant determinant of bonus and simultaneously an insignificant determinant of salary, supporting the contention that stockholder monitoring and incentive contracts are alternate means of ensuring managerial compliance with stockholder objectives. This reconciles the "monopoly" view that managers of firms are able to exploit the information asymmetry, with the "competitive view" that the market for managers is efficient.

Impact and interest:

5 citations in Web of Science®
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ID Code: 6832
Item Type: Journal Article
Additional Information: For further information please contact Evan Douglas on evan.douglas@qut.edu.au
Keywords: Evan Douglas, Entrepreneurship, information asymmetry
ISSN: 0033-5797
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BUSINESS AND MANAGEMENT (150300) > Organisational Planning and Management (150312)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BUSINESS AND MANAGEMENT (150300)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BUSINESS AND MANAGEMENT (150300) > Small Business Management (150314)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 1990 Trustees of the University of Illinois
Deposited On: 30 Mar 2007
Last Modified: 05 Jan 2011 23:30

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