Type of Document	Dissertation
Author	Nagel, Gregory Leo
Author's Email Address	glnagel@aol.com
URN	etd-04082005-113916
Title	Essay 1: The Home Court Advantage and CEO Real Asset Performance Persistence; Essay 2: Automatic Ratcheting of CEO pay
Degree	Doctor of Philosophy
Department	Finance, Department of
Advisory Committee	Advisor Name Title James Ang Committee Chair Donald Nast Committee Member James Nelson Committee Member Richard Morton Committee Member Yingmei Cheng Committee Member
Keywords	CEO Outside Hire Performance Turnover Labor Market Compensation
Date of Defense	2005-03-25
Availability	unrestricted
Abstract In this dissertation two distinct but complimentary topics are researched. The first chapter investigates the residual income and return on asset performance of 19,444 different CEOs at non-financial firms spanning 53 years including 2,397 outside hire CEOs. By testing the optimal skills matching model we show that (1) some firm-CEO pairs have persistence of superior performance beyond chance expectations, (2) superior CEOs make essential contributions which are rarely transferable across firms, even at large firms. CEOs as a group do not achieve persistent superior performance. However, there is a small percentage of CEOs that do; they are usually inside hires. Finally, we find that median cumulative performance for inside hires is at least as great as that of outside hires. That is we demonstrate insiders have the home court advantage. In chapter 2 we examine median CEO compensation between 1970 and 2002 and find that it is rising faster than can be explained by increasing performance or increasing power for the group of CEOs. Our results suggest that ratcheting explains 75 percent of the elevation in median CEO pay since 1970. Ratcheting is set up by using prior year peer pay to determine compensation in the current year. It is likely that ratcheting started in the early 1980s, coincident with a four times increase in compensation consultant revenue growth. We also find that excess pay is most often given when the CEO is also COB and when there is a cover that negates the effect of investor outrage on the board.
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