Swarnodeep Homroy

Was Adam Smith right?: evidence of compensating differential in CEO pay?

This paper estimates the compensating differential in CEO pay for the increasing risk of dismissal using contracted severance pay eligibility of the CEO as the main instrument. US CEOs receive a 3 per cent premium in pay for each percentage point increase in the risk of dismissal. In pointing to the dismissal risk as a determinant of CEO pay, these findings contribute to the debate on the recent growth in CEO pay and the potential impacts of governance reforms.

Are CEOS Replaced for Poor Performance? Effects of Takeovers and Governance On CEO Turnover

This article analyzes the risk of CEO turnover in US firms over the period 1993–2011. There is an increase in the CEO turnover rate and a 41% decline in median tenure. Where firm performance is poor, CEOs are increasingly replaced, either by the board or in the process of the firm being taken over. US corporate governance regulations had some success in mitigating the agency problem. In the wake of those reforms, CEO turnover outcomes are more strongly associated with firm performance. The declining CEO tenure may have structural impacts on CEO pay.