The Effect of Disclosure on the Pay-Performance Relation

@article{Franco2012TheEO,
  title={The Effect of Disclosure on the Pay-Performance Relation},
  author={Gus De Franco and Ole-Kristian Hope and Stephannie Larocque},
  journal={Corporate Governance: Disclosure},
  year={2012}
}
We examine whether greater transparency leads to improved evaluation and rewarding of management. We posit that disclosure improves board effectiveness at monitoring executives and in strengthening the link between pay and performance. We use management guidance as our empirical proxy for disclosure and document the following. We predict and find higher sensitivity of CEO compensation to performance (both accounting and stock returns) for firms that issue management guidance than for firms that… Expand
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