Abstract
This study investigates the association between CEO remuneration and firms' state of financial distress and whether that relationship varies systematically across firms' life cycle stages. Using a sample of 6508 firm-year observations over the 2004–2021 period, we find that a firm's state of financial distress is negatively related to CEO remuneration. We also find that this relationship holds in the mature and old stages of a firm life cycle, but not in the young phase. Our findings are consistent with the predictions of resource-based and efficient contracting theories, and are robust to endogeneity tests. Overall, our results show that CEO remuneration is a significant determinant of corporate financial distress.
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