| Summary: | 碩士 === 中國文化大學 === 會計研究所 === 96 === The purpose of this paper is how CEO compensation is related to firms’ debt capital and board characteristics. There are two kinds of agency problems: one is shareholder-manager conflict, the other is shareholder-bondholder conflict. Because of convertible debt has both debt and equity fund characteristics, it can mitigate shareholder-bondholder conflicts, debt measures that exclude convertible debt are a more precise proxy for examine the effect of stockholder-bondholder conflicts that could be mitigated through the use of deferent types of debt. A firm’s board characteristics can make different effect on agency problems. If the effectiveness of the board is greater, monitor factor can alignment agency problem between stockholders and manager.
Using a sample of Taiwanese listed firms, I find that compensation -performance sensitivity decreases in straight debt leverage, but is higher in firms with convertible debt. This results support the prediction that firms exist the trade-off effect through shareholder-manager and shareholder-bondholder conflicts of interest.
Moreover, I find that pay-performance sensitivity increases in board size and CEO ownership, but is lower in outside director percentage. This results support the prediction that board characteristic exist significant relationship to CEO compensation-performance
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