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Shareholder Composition and Managerial Compensation

Published online by Cambridge University Press:  16 December 2016

Shinya Shinozaki ,
Hiroshi Moriyasu  and
Konari Uchida
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Abstract

Stock options are used only sparingly in Japan. Japanese firms are more likely to adopt new stock option plans when they are more (less) owned by arms-length investors (stable and controlling shareholders). Those firms have significantly more independent boards and pay higher dividends surrounding the adoption year than their industry peers. These results suggest that firms adopting stock options endeavor to meet demands for good governance practice from arms-length shareholders and to follow good governance practices in other dimensions. The coexistence of arms-length, stable, and controlling shareholders generates a situation in which stock options are not widely used in Japan.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 51 , Issue 5 , October 2016 , pp. 1719 - 1738
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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