The effect of corporate governance on CEO luck: Evidence from the Institutional Shareholder Services (ISS)

Pandej Chintrakarn, Pornsit Jiraporn, J. C. Kim

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

CEOs are "lucky" when they receive stock option grants on days when the stock price is the lowest in the month of the grant, implying opportunistic timing. Extending the work of Bebchuk et al. (2010), we explore the effect of overall corporate governance quality on CEO luck. Provided by the Institutional Shareholder Services (ISS), our comprehensive governance metrics are much broader than those used in prior studies, encompassing more diverse aspects of corporate governance, such as audit, state laws, boards, ownership, and director education. We show that an improvement in governance quality by one standard deviation diminishes CEO luck by 14.77-21.06%. The governance standards recommended by ISS appear to be effective in deterring the opportunistic timing of option grants.

Original languageEnglish (US)
Pages (from-to)169-174
Number of pages6
JournalFinance Research Letters
Volume10
Issue number4
DOIs
StatePublished - Dec 1 2013

All Science Journal Classification (ASJC) codes

  • Finance

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