The determinants of executive pay components, incentive pay ratio and tournament's pay structure: the UK evidence

Tran, Phuong Viet (2011) The determinants of executive pay components, incentive pay ratio and tournament's pay structure: the UK evidence. PhD thesis, University of Nottingham.

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Abstract

This thesis provides a review and empirical analysis of the determination of executive compensation components, long-term incentive pay ratios and the implication of tournament pay structures. The sample of 1,137 executive-year observations of comprehensive executive compensation packages from FTSE350 companies are exploited to advance our understanding of executive pay determination.

The meta-analysis in chapter three provides a systematic review of prior literature on the pay-performance relationship and indicates that the true association between executive pay and firm performance is positive. The economic significance of the relationship, however, is low with less than one percent of executive pay rise is directly attributable to the improvement in firm performance.

Chapter six examines the determinants of executive pay components and incentive pay ratios. The empirical results suggest that main determinants of executive pay components and incentive pay ratios are firm performance, firm size, executive tenure and the CEO position. The empirical results are sensitive to performance measures used in analysis.

Chapter seven provides some evidence supporting a tournament pay structure in the UK companies with strong connection between executive pay and organizational hierarchy. The convexity of the pay-position relationship implies that extra compensation weight is placed on the most senior executive compensation and the pay-gap is increasing over time. No evidence of the effect of the number of contestants on the tournament prize suggests the growing trend of hiring external CEO candidates rather than internal promotion.

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Thompson, R.S.
Ucbasaran, A.D.
Subjects: H Social sciences > HD Industries. Land use. Labor
Faculties/Schools: UK Campuses > Faculty of Social Sciences, Law and Education > Nottingham University Business School
Item ID: 13042
Depositing User: EP, Services
Date Deposited: 21 Jan 2013 14:11
Last Modified: 15 Sep 2016 01:58
URI: http://eprints.nottingham.ac.uk/id/eprint/13042

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