Corporate spinoffs and executive compensation |
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Authors: | Justin Law Wayne Yu |
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Affiliation: | 1. School of Accounting and Finance, The Hong Kong Polytechnic University, Hung Hom, Hong Kong, China2. College of Business, City University of Hong Kong, Kowloon Tong, Hong Kong, China. |
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Abstract: | This paper investigates the impact of corporate spinoffs on executive compensation. We find no significant association between executive compensation and stock returns prior to spinoffs, but a significant positive association between the two afterwards. We also find evidence that corporate governance generally improves after the spinoff. In addition, the positive association between executive compensation and stock returns is more pronounced for firms with greater improvements in their corporate governance. Overall, our findings support the notion that spinoffs create value by reducing agency costs. |
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Keywords: | Spinoffs Corporate governance CEO compensation |
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