Review of Corporate Finance > Vol 5 > Issue 1–2

The Effect of Board Reforms on CEO Compensation: Evidence from a Comparison between Public and Private Firms

Kee-Hong Bae, York University, Canada, kbae@schulich.yorku.ca , Jisok Kang, John Carroll University, USA, jkang@jcu.edu , Albert Tsang, Southern University of Science and Technology, China, Zengxl@sustech.edu.cn
 
Suggested Citation
Kee-Hong Bae, Jisok Kang and Albert Tsang (2025), "The Effect of Board Reforms on CEO Compensation: Evidence from a Comparison between Public and Private Firms", Review of Corporate Finance: Vol. 5: No. 1–2, pp 21-60. http://dx.doi.org/10.1561/114.00000070

Publication Date: 31 Mar 2025
© 2025 K.-H. Bae, J. Kang and A. Tsang
 
Subjects
Corporate governance,  Executive compensation,  Corporate finance,  Law and economics
 
Keywords
JEL Codes: G34, G36, M12
CEO compensationcorporate board reformprivate firmsefficient contractingrent extraction
 

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In this article:
Introduction 
Data and Summary Characteristics 
Pay Differential between Public and Private Firm CEOs 
Pay Differential and Corporate Board Reforms 
Conclusion 
Appendix A. Board reforms 
Appendix B. Data Sources and Variable Definitions 
References 

Abstract

CEOs of public (listed) firms earn more than their counterparts in similar private (unlisted) firms. This can either be because rent extraction is easier in public firms than in private firms (rent extraction view), or because managing a public firm involves more legal and institutional responsibilities than managing an otherwise similar private firm (efficient contracting view). We show that corporate board reforms from 29 countries that strengthen board diligence, thus imposing more responsibilities on CEOs of public firms, result in a significant increase in the pay of CEOs of public firms relative to private firms. This result is consistent with the efficient contracting view of CEO compensation.

DOI:10.1561/114.00000070

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Review of Corporate Finance, Volume 5, Issue 1–2 Special Issue on International Corporate Finance: Articles Overview
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