Corporate Diversification And Firm Performance Impact On Chief Executive Officers Salary

Abstract

The purpose of this research is to examine CEO salary and to explore whether the independent variables (international diversification, industrial diversification, market-based performance, accounting-based performance) are associated with CEO salary. Corporate diversification in this study is divided into international diversification and industrial diversification. Data for the study was obtained from annual reports of CEO salary on the ExecuComp database. Compensation data collected from the annual reports encompassed 2,448 CEOs from 1,622 firms. The dependent variable was developed from a review of CEO salary and accounting literature. The hypothesized predictors of CEO salary were identified through a review of existing studies. The results show that the higher the degree of international diversification and/or industrial diversification, the more CEOs receive in fixed salary. In addition, this study found that CEO salary is a better predictor of accounting performance than stock return performance.