Title: Monitoring role of institutional and family block-holders in Canadian corporations
Authors: George F. Tannous; Fan Yang; Weiwei Jiang
Addresses: Department of Finance and Management Science, Edwards School of Business, University of Saskatchewan, 25 Campus Drive, Saskatoon, Saskatchewan, S7N 5A7, Canada ' Department of Finance and Management Science, Edwards School of Business, University of Saskatchewan, 25 Campus Drive, Saskatoon, Saskatchewan, S7N 5A7, Canada ' Royal Bank of Canada, Stonebridge Village Branch, 3118 Clarence Ave S, Saskatoon, Saskatchewan, S7T 0C9, Canada
Abstract: This study examines whether the monitoring provided by family block-holders is more or less effective than the monitoring provided by institutional block-holders. The data consist of compensation and performance data of Canadian corporations. We measure the elasticity and the sensitivity of bonus and equity-based compensation to return on assets and market-adjusted return as measures of performance. We interpret high and significant elasticity and sensitivity to be indicators of effective monitoring. We find that Chief Executive Officer (CEO) bonus compensation is elastic and sensitive to performance in family-controlled firms but not in institution-controlled or widely-held corporations. Equity-based compensation is neither elastic nor sensitive to performance. Overall, the study implies that the monitoring provided by institutional block-holders is ineffective in linking CEO incentive compensation to performance. Thus, shareholders should continue their efforts to improve the mechanisms by which they monitor managers.
Keywords: performance monitoring; institutional block-holders; family block-holders; CEO bonus compensation; equity-based compensation; market performance; accounting performance; Canadian corporations; Canada; incentive compensation; incentives; corporate governance.
International Journal of Corporate Governance, 2013 Vol.4 No.3, pp.277 - 303
Published online: 02 Sep 2013 *Full-text access for editors Access for subscribers Purchase this article Comment on this article