【Topic】Does High Cash Compensation Compromise the Independence of Outside Directors? Evidence from Directors’ Dissenting Votes

【Time】12:30pm on Friday, May 24, 2019

[Venue] Conference Room 1629, Rear main Building

[Speaker] Professor Luo Jinhui, Department of Accounting, School of Management, Xiamen University

[Host] Professor Hao Ying, Department of Accounting, BNUBS

【Abstract】

Using data on directors’ voting behavior in board meetings, we examine whether high cash compensation compromises outside directors’ independence in monitoring executives. The results show that highly paid outside directors are more likely to vote against proposals sponsored by executives, particularly in firms with weaker monitoring of executives. Highly paid outside directors are positively associated with cash dividends and future firm performance. Overall the evidence suggests that high cash compensation reflects the market value of reputable outside directors who effectively monitor executives and contribute to firm performance.

【About the speaker】

Luo Jinhui is professor and doctoral supervisor of Accounting Department, School of Management, Xiamen University. His current research interests are financial accounting and corporate governance in capital market. In recent years, he has published many academic papers in authoritative journals at home and abroad, including The Journal of Accounting Research, Journal of Financial Research, Journal of Management Science, Journal of Chinese Industrial Economics, Journal of Accounting and Public Policy, Journal of Banking and Finance, And Journal of Business Ethics. He has won the National Hundred Excellent Management Cases Award and fok Yingdong Education Foundation Young Teacher Award. He has been selected into the High-end (reserve) Accounting Talents (academic) training program of the Ministry of Finance, the New Century Excellent Talents Support Program of Fujian Universities, the Outstanding Young Scientific Research Talents Training Program of Fujian Universities and the Top-notch Young Talents Support Program of Xiamen University.