Abstract
I find CEO pay-performance sensitivity being higher for non-family firms with dispersed ownership than for family firms. The lower agency conflict of family owned firms, and the easier monitoring on the board of directors explain the results. Furthermore, within family owned firms, the pay-performance sensitivity of professional CEOs is higher than the pay-performance sensitivity of family CEOs, because family CEOs incentives are tightly aligned with those of the controlling family, and they are also motivated by the preservation of the corporate control. Robustness tests rule out competing hypotheses that family rent extraction purposes, or similar level of ownership concentration (i.e. the blockholder-controlled firms) may drive the results. Finally, this work demonstrates that, in my sample, accounting performance is more important than stock market returns in setting the CEO pay for both family and non-family firms.
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