Relation between CEO compensation, firm size and firm performance
Authors: Ed Vos, Ann Lau and Ed Vos
Abstract: Studies focused on large companies in the United States, Japan and Britain have documented that there is a strong positive relation between firm size and CEO compensation. They also find the relation between firm performance and CEO compensation is weak. Executive compensation of 104 New Zealand firms are examined over the period of 1998 – 2002, and evidence is obtained consistent with previous studies. Results show that for every percentage increases in the firm’s total assets, the cash compensation paid to the average CEO increases by 0.39 percent. This result is very close to the finding of many previous studies that identify firm size elasticity between 0.2 to 0.35 for larger U.S., U.K. and Japanese firms. Results also show that the firm size elasticity of CEO compensation is greater in larger firms.