Title

Two essays on dividend policy, managerial compensation, and corporate governance

Date of Award

2009

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Business Administration

Advisor(s)

Thomas Barkley

Second Advisor

Zixiang Tan

Keywords

Dividend policy, Stock awards, Managerial compensation, Option awards, Corporate governance, Salary and bonus

Subject Categories

Accounting | Business | Business Administration, Management, and Operations | Corporate Finance

Abstract

The two essays of the dissertation address two of the corporate issues that are of interest to researchers, practitioners and investors: dividend payout policy and corporate governance. The first essay, entitled "Corporate Payout Policy and CEO Compensation Structure", examines how corporate payout policy is affected by CEO compensation structure using data from more than 1,600 U.S. firms during 1992-2006. Typically, the components of total CEO compensation are salary, bonus, stock awards, and option awards, each of which represents approximately 25% of total CEO pay. By examining the change of each component of CEO compensation (salary, bonus, stock awards, and option awards) in size and percentage relative to total compensation, I find that when compensation is linked to stock or option awards, CEOs tend to use share repurchases (rather than cash) as a way to distribute dividends. In addition, when option awards as a percentage of total compensation increase, CEOs tend to choose share repurchases rather than cash dividends. The results help understand the relationship between corporate payout policy and CEO compensation structure, which is beneficial to researchers, practitioners, and investors.

The second essay is "Corporate Governance and Firm Performance for Chinese Companies Listed on U.S. Stock Exchanges." Using data from a sample of 74 Chinese firms (including Hong Kong and Taiwanese firms) listed on the NYSE, AMEX, and NASDAQ between 2005 and 2008, I examine the relationship between firm performance and board structure, CEO characteristics, and ownership structure. In addition, I compare the impacts of corporate governance determinants (board structure, CEO characteristics, and ownership structure) on firm performance between Chinese and matched U.S. firms listed on U.S. stock exchanges. I find that for the Chinese firms, CEO-Chair duality, institutional ownership, and insider ownership are positively associated with firm performance. In addition, I find that the positive effect of institutional ownership on firm profitability is more pronounced for the U.S. firms than for the Chinese firms. On the other hand, the positive effect of insider ownership on firm profitability turns out to be reversed. The results help researchers, practitioners, and investors understand and compare corporate governance determinants and their impacts on firm performance between Chinese firms and their matched U.S. counterparts. These are important considerations as foreign direct investment and cross-border mergers and acquisitions by U.S. entities continue to increase in China.

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