INVESTOR PROTECTION AND CEO COMPENSATION IN FAMILY FIRMS

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Stefano Bozzi, Roberto Barontini, Ivan Miroshnychenko ORCID logo

DOI:10.22495/cocv14i2art2

Abstract

This paper investigates the relationship between investor protection and CEO pay in family-controlled corporations. Using a panel of 986 firm-year observations from 11 EU countries, we show that the lower the investor protection, the higher the compensation of the CEO. The sensitivity of pay to the institutional context is higher for a family CEO than a professional CEO, a result that corroborates the hypothesis that CEO compensation contracts in family firms are influenced by familiar connections. Overall, these results are more consistent with the hypothesis of rent extraction than with the perspective of optimal remuneration contracts.

Keywords: Corporate Governance, Agency Theory, CEO Compensation, Family Firms, Investor Protection

Date received:19 November 2016

Date accepted: 09 January 2017

How to cite this paper: Bozzi, S., Barontini, R., & Miroshnychenko, I. (2017). Investor protection and CEO compensation in family firms. Corporate Ownership & Control, 14(2), 17-29. http://doi.org/10.22495/cocv14i2art2