원문정보
초록
영어
This paper studies whether the CEO’s social networks affect CEO compensation. Given that the board has advisory and monitoring roles, a CEO with more external networks faces less necessity to share information with the board, and thus, the board’s monitoring weakens. Using network measures between the Korean firms’ executives, I find that CEOs with more external networks receive higher compensations with lower pay-for-performance sensitivities on average, compared to ones with less external networks. The results are robust to a battery of tests and an exogenous shock on the CEO’s external network by a presidential election. Additionally, I hypothesize that the CEO’s internal networks with the board have a trade-off effect: CEO-board connection may reduce information asymmetry between them; however, a connected board may not intensively monitor the CEO. Empirically, I find evidence supporting the latter, that the CEO-board connection enforces the effect of the CEO’s external networks on CEO compensation and pay-for-performance sensitivity.
목차
1. Introduction
2. Theoretical prediction
2.1. The model
2.2. Derivation by backward induction
2.3. Relationships between the parameters
2.4. Numerical example
3. Literature review and hypotheses development
3.1. Executive external social networks
3.2. Monitoring and CEO compensation
3.3. Executive internal social network: CEO-Board connection
4. Data
4.1. Executive social networks
4.2. CEO compensation
4.3. Sample selection and descriptive statistics
5. Empirical analysis
5.1. External social networks and CEO compensation: Hypothesis 1
5.2. Robustness tests: Alternative explanations
5.3. Robustness tests: Heterogenous effect by the firm’s advisory needs
5.4. CEO pay-for-performance sensitivity: Hypothesis 2
5.5. Effect of the CEO’s internal network: Hypotheses 3 and 4
6. Evidence from the quasi-natural experiment by the Korean presidential election
6.1. Institutional background: Exogenous shock on CEO’s external network
6.2. Results
7. Conclusion
References
Table
Appendix A. Proofs
Appendix B. Variables definitions
Appendix C. Appendix Tables