Corporate spinoffs and executive compensation

Frontiers of Business Research in China

Table 5 Corporate governance & pay-performnace elasticity regressions

	Dependent Variable: Log Difference in Total Compensation
	Component 1 Board Structure	Component 2 Committee Independence	Component 3 Board and Committee Meetings	Component 4 Institutional Ownership	Component Total
Intercept (b1)	0.634**	0.955***	0.803***	0.657***	0.472
Intercept (b1)	(2.21)	(3.92)	(3.19)	(3.21)	(1.45)
Rtn _t (b2)	−0.102	0.010	−0.046	−0.156	0.039
Rtn _t (b2)	(−0.42)	(0.04)	(−0.15)	(−0.67)	(0.14)
Rtn _t-1 (b3)	−0.139	− 0.063	− 0.226	−0.095	0.057
Rtn _t-1 (b3)	(−0.53)	(−0.24)	(− 0.79)	(− 0.35)	(0.21)
SpD × Rtn _t (b4)	0.155	0.031	0.338	0.352	0.252
SpD × Rtn _t (b4)	(0.38)	(0.09)	(0.73)	(1.2)	(0.52)
SpD × Rtn _t-1 (b5)	0.732*	0.445	1.077***	0.620**	0.771
SpD × Rtn _t-1 (b5)	(1.86)	(1.27)	(2.67)	(2.06)	(1.56)
RCG (b6)	0.002*	0.000	0.002	0.007**	0.001*
RCG (b6)	(1.75)	(0.18)	(1.41)	(2.38)	(1.81)
SpD (b7)	−0.291**	−0.224*	− 0.28*	− 0.203	− 0.172
SpD (b7)	(−2.33)	(−1.88)	(− 1.86)	(− 1.48)	(− 1.39)
SpD× RCG × Rtn _t (b8)	0.001	0.003	− 0.001	− 0.001	0.000
SpD× RCG × Rtn _t (b8)	(0.49)	(0.82)	(−0.36)	(− 0.39)	(− 0.31)
SpD× RCG × Rtn _t-1 (b9)	−0.002	− 0.002	−0.006**	− 0.008	−0.002
SpD× RCG × Rtn _t-1 (b9)	(−0.87)	(−0.74)	(−2.11)	(−1.35)	(− 1.32)
Industry Dummies	Included	Included	Included	Included	Included
Year Dummies	Included	Included	Included	Included	Included
N	257	247	233	262	223
R ²	0.211	0.211	0.194	0.213	0.193

This table reports the coefficients on the panel pay-performance elasticity regression interacted with a composite corporate governance score, RCG, for the pre-spinoff parent in Year −1 and the post-spinoff parent firms from Year + 1 to Year + 3. The dependent variable for all regressions is the first difference in the log of total CEO compensation. Shareholder wealth is measured by stock return. RCG is the sum of the ranked corporate governance variable in each of the 4 different components of corporate governance: board structure (Component 1), committee independence (Component 2), board and committee meetings (Component 3) and institutional ownership (Component 4). A higher value RCG denotes stronger governance. Industry dummies are indicator variables denoting the industry of sample firms in 4-digit SIC codes. Other variables are previously defined. The t-statistics, which are based on White standard errors robust to within firms’ cluster correlation, are reported in parenthesis. ***, ** and * denote significance at the 1%, 5%, and 10% level respectively. Variation in sample size is due to data availability