The Effect of Say on Pay on CEO Compensation and Spill-over Effect on Corporate Cash Holdings: Evidence from Australia

Atif, M., Huang, A., & Liu, B. (2019). The effect of say on pay on CEO compensation and spill-over effect on corporate cash holdings: Evidence from Australia. Pacific-Basin Finance Journal, Forthcoming

Posted: 15 Jun 2016 Last revised: 9 Jul 2019

See all articles by Muhammad Atif

Muhammad Atif

Macquarie University - Department of Accounting and Corporate Governance

Allen Huang

Griffith University - Department of Accounting, Finance and Economics

Benjamin Liu

Griffith University - Department of Accounting, Finance and Economics

Abstract

We examine the impact of Australia’s Remuneration Amendment Act 2011 on CEO compensation and its spill-over effect on cash holdings to better understand how the new legislation affects the principal–agent relationship. Using a sample of ASX top 300 firms from 2004 to 2015, we find that the Act leads to more use of equity-based compensation. We also document that, after the introduction of the Act, CEO equity-based and total compensations are negatively related with cash holdings, i.e., more equity and total compensations lead to lower cash holdings (a spill-over effect), indicating alignment of the principal–agent interests. We praise the Act for the achievements. Our results are robust to different estimation techniques. Our findings provide important insights for the discussion on compensation regulations.

Keywords: corporate governance; say on pay; CEO compensation; cash holdings

JEL Classification: G30, G32, G34, G38

Suggested Citation

Atif, Muhammad and Huang, Allen R. and Liu, Benjamin, The Effect of Say on Pay on CEO Compensation and Spill-over Effect on Corporate Cash Holdings: Evidence from Australia. Atif, M., Huang, A., & Liu, B. (2019). The effect of say on pay on CEO compensation and spill-over effect on corporate cash holdings: Evidence from Australia. Pacific-Basin Finance Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2795838 or http://dx.doi.org/10.2139/ssrn.2795838

Muhammad Atif (Contact Author)

Macquarie University - Department of Accounting and Corporate Governance ( email )

Sydney, NSW 2109
Australia

Allen R. Huang

Griffith University - Department of Accounting, Finance and Economics ( email )

PMB 50
Gold Coast Queensland 9726
Australia

Benjamin Liu

Griffith University - Department of Accounting, Finance and Economics ( email )

PMB 50
Gold Coast Queensland 9726
Australia

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