How the Legal System Affects the Equity Mix in Executive Compensation |
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| Authors: | Stephen Bryan Robert Nash† Ajay Patel‡ |
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| Institution: | Stephen Bryan is a Professor of Accounting at Fordham University in New York, NY.;Robert Nash is an Associate Professor of Finance at Wake Forest University in Winston-Salem, NC.;Ajay Patel is a Professor and GMAC Chair in Finance at Wake Forest University in Winston-Salem, NC. |
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| Abstract: | We examine variation in relative use of equity-based compensation (equity mix) across firms from different legal environments by studying 381 non-US firms from 43 countries during the 1996-2000 period. These firms are from countries that provide varying degrees of legal protection for shareholders. The data indicate association between equity mix and the degree of legal protection of shareholder rights. Specifically, firms use relatively more equity-based compensation if in a legal environment where shareholder rights are more strongly protected and where laws are more effectively enforced. These findings add to the literature demonstrating a relationship between institutional factors and financial decisions. |
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