Title: Effect of CEO-TMT pay ratio on the value of new product introductions

Authors: Prachi Gala; Saim Kashmiri; Cameron Nicol

Addresses: Coles College of Business, Kennesaw State University, Kennesaw, Georgia, USA; Gordon Institute of Business Science, University of Pretoria, South Africa ' School of Business Administration, University of Mississippi, Oxford, Mississippi, USA ' Union University, Jackson, Tennessee, USA

Abstract: This study attempts to investigate the unexplored role played by a key corporate governance factor (CEO-TMT pay ratio) in explaining the variance in stock market response to new product introductions. Results of an event study support the authors' hypotheses that the stock market reacts less positively to announcements about new product introductions when the firms introducing these products have high CEO-TMT pay ratios. We also find that high advertising intensity and a history of many new product introductions tend to attenuate the negative impact of CEO-TMT pay ratio. A history of many corporate social concerns, however, tends to further strengthen this impact. These results have important implications for board members, investors, customers, compensation committee members, and scholars investigating the valuation of new product introductions.

Keywords: CEO-TMT pay ratio; compensation; new product introductions; event study; abnormal stock returns; advertising; corporate social concerns.

DOI: 10.1504/IJCG.2024.142070

International Journal of Corporate Governance, 2024 Vol.14 No.4, pp.357 - 378

Accepted: 15 Dec 2023
Published online: 07 Oct 2024 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article