최고경영자의 자기과신 성향과 성과 - 보상 민감도

This paper examines the relationship between CEO overconfidence and pay-for-performance sensitivity. This study also investigates whether the relationship between CEO overconfidence and pay-for-performance sensitivity varies with industry characteristics such as industry competition and growth. Based on non-financial companies listed on Korea Stock Exchange for the fiscal years from 2012 to 2019, we find that CEO overconfidence is positively associated with pay-for-performance sensitivity. In addition, the positive association between CEO overconfidence and pay-for-performance sensitivity is more pronounced when firms are in a competitive industry or in a growing industry. Since overconfident CEOs are more likely to overestimate future returns of investment projects, their optimism could lead to the decrease in shareholders’ value. Thus, the results suggest that the board is more likely to increase the sensitivity of CEO pay to accounting performance in order to monitor CEO’s investment decisions. In addition, the board of directors provides a different compensation package to overconfident CEOs when the company is operating in more competitive, growing industries. This research has the following contributions. First, this is the first study that examines the association between CEO overconfidence and pay-for-performance sensitivity using the data collected after the Financial Supervisory Service (FSS)’s amendment of the capital market act of 2013, which requires Korean listed firms to disclose their executives’ compensation information exceeding 500 million won a year. Second, our findings suggest that both individual and industry-level characteristics have a significant influence on the choice of compensation structure by the board of directors.