2010/10/01 by Anthony J. Nyberg, Ingrid Smithey Fulmer, Barry Gerhart +1 · 3 citations
Business, Management and Accounting · #Corporate Finance and Governance #Financial Reporting and Valuation Research #Private Equity and Venture Capital
paper · doi:10.5465/amj.2010.54533188
Agency theory suggests that managerial mischief may occur when the interests of owners and managers diverge and that a solution to this agency problem is alignment of owner and agent interests through agent compensation and equity ownership. We develop the theoretical concept of CEO return and measure and estimate financial alignment as the relationship between CEO and shareholder returns. Our results, based on this new conceptualization and corresponding measurement, suggest stronger alignment than reported in previous work. The magnitude of this alignment is associated with subsequent firm performance, but in ways not clearly articulated or tested in prior research.