ScienceDirect Publication: Finance Research Letters
Tue, 19 Nov 2019 12:01:27 GMT language
Publication date: December 2019
Source: Finance Research Letters, Volume 31
Author(s): Hong-min Chun
This paper examines CEO pay disparity and its effect on the implied cost of equity capital (ICOE). Existing empirical results suggest that a higher CEO pay disparity increases the ICOE. Thus, a chaebol-affiliated firm with a high CEO pay disparity could be a possible factor contributing to the risk premium. As a result, in Korea, a higher CEO pay disparity represents a risk premium closely related to the management power perspective (Chen et al., 2013). Further, this positive association is more pronounced in a chaebol with low internal monitoring (low outside director ratio) firms.