Corporate spinoffs and executive compensation

Justin Law; Wayne Yu

doi:10.1186/s11782-018-0043-9

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Front. Bus. Res. China ›› 2018, Vol. 12 ›› Issue (4) : 399-423. DOI: 10.1186/s11782-018-0043-9

RESEARCH

Corporate spinoffs and executive compensation

Justin Law¹ ,
Wayne Yu²

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Abstract

This paper investigates the impact of corporate spinoffs on executive compensation. We find no significant association between executive compensation and stock returns prior to spinoffs, but a significant positive association between the two afterwards. We also find evidence that corporate governance generally improves after the spinoff. In addition, the positive association between executive compensation and stock returns is more pronounced for firms with greater improvements in their corporate governance. Overall, our findings support the notion that spinoffs create value by reducing agency costs.

Keywords

Spinoffs / Corporate governance / CEO compensation

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Justin Law, Wayne Yu. Corporate spinoffs and executive compensation. Front. Bus. Res. China, 2018, 12(4): 399‒423 https://doi.org/10.1186/s11782-018-0043-9