CEO ownership and firm performance: Evidence from the 2003 Dividend Tax Cut
This study investigates whether and how CEO ownership impacts firm performance by using the large tax cut on individual dividend income enacted in 2003 (The 2003 Dividend Tax Cut) as an exogenous shock. My findings suggest that CEO ownership of dividend payers significantly increased after the shock in the form of higher annual restricted stock grants and more option exercises. I document that the change in CEO ownership has an asymmetric impact on firm performance and investment efficiency. Only dividend payers with CEOs who moved closer to optimal ownership experienced improvement in investment efficiency and performance. In contrast, dividend payers with CEOs who moved further away from optimal ownership experienced lower investment efficiency and had poorer performance. Overall, my findings provide insights to the design and efficacy of CEO compensation by showing that changes in CEO ownership lead to changes in firm performance.^
Duong, Hong Kim, "CEO ownership and firm performance: Evidence from the 2003 Dividend Tax Cut" (2016). ETD Collection for University of Texas, El Paso. AAI10193461.