New Vs. Old Economy: Trends and Determinants of Executive Compensation

Posted: 2 Mar 2007

See all articles by João Paulo Vieito

João Paulo Vieito

Scholl of Business Studies - Polytechnic Instituto of Viana do Castelo

Antonio Melo Cerqueira

Universidade do Porto - Faculdade de Economia (FEP)

Elisio Brandao

Universidade do Porto - Faculdade de Economia (FEP)

Walayet A. Khan

University of Evansville

Date Written: February 20, 2007

Abstract

We analyzed the executive compensation in the new and old economy in the period between 1992 to 2005. We focused on the evolution of the compensation and the factors that explain the executive compensation and if the form of compensation changed after the Nasdaq crash and the Sarbanes-Oxley act.

Our results reveal that the new economy executives received, on average, much more than executives from the old economy from 1992 to 2003, but after 2004 the mean difference is very small and not statistically significant. In terms of compensation components, old economy executives always received more salary than new economy executives, and between 1992 to 2000, new economy executives received more bonus than old economy executives, but after this year the situation changes.

We also found that the crash of Nasdaq and the Sarbanes Oxley act affected in a different way the executive compensation from new and old economy. In the case of the new economy, executives are changing from stock options based compensation to restricted stocks, and in the case of the old economy, they are changing to bonuses.

We also investigated the impact of corporate governance and financial variables on new and old economy CEOs' and Directors' compensation and found evidence that the percentage of stock options that are vested but not exercised, size of the firm, the percentage of firm stocks owned by the executive, volatility, closing price of the company stock for the calendar year, one year total return to shareholders, number of board meetings, age as CEO and the ROA are variables that play important roles in explaining CEO and Director compensation. We also found that these factors are not all the same when we explain CEO and directors compensation from new and old economy and, in the case of the variables that are the same the intensity of the coefficients is different and generally statistically significant

Keywords: New vs. Old Economy: Trends and Determinants of Executive Compensation

JEL Classification: g38

Suggested Citation

Vieito, João Paulo and Cerqueira, Antonio Melo and Brandão, Elísio Fernando Moreira and Khan, Walayet A., New Vs. Old Economy: Trends and Determinants of Executive Compensation (February 20, 2007). Available at SSRN: https://ssrn.com/abstract=967513 or http://dx.doi.org/10.2139/ssrn.967513

João Paulo Vieito (Contact Author)

Scholl of Business Studies - Polytechnic Instituto of Viana do Castelo ( email )

Avenida Miguel Dantas
Valença, 4930
Portugal

Antonio Melo Cerqueira

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

Elísio Fernando Moreira Brandão

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

Walayet A. Khan

University of Evansville ( email )

School of Business Admin 1800 Lincoln Avenue
Evansville, IN 47722
United States
812-479-2869 (Phone)
812-479-2872 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
66
Abstract Views
552
rank
402,508
PlumX Metrics