Abstract
We study the motives and impact of $1 CEO salaries on firm performance and CEO compensation. We find that on average $1 CEO firms earn lower stock market returns relative to their peers following the adoptions of $1 salaries. The underperformance is especially pronounced for firms that adopt $1 CEO salaries for reasons other than restructuring, experiencing about 30% lower stock returns during the three-year post-adoption period. Meanwhile, CEOs in these firms are better off since they get more total compensation and larger equity grants in the second year following adoptions than the loss in pay in the first year.
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