CEO Compensation and Company Performance An Empirical Study of the situation in Sweden’s Listed Companies

Abstract

This Master Thesis attempts to explain the relationship between CEO compensation and company performance in Sweden’s Listed Companies. The data collected for this study is from the years 1999, 2000, 2001, and 2002. The main purpose of this study is to see whether the CEO’s bonus is affected by the company performance or whether the opposite relationship exists, the CEO’s bonus itself has a positive influence on company performance. The study involves a general examination of companies from all lists on the Stockholm Stock Exchange, and it also involves separate tests on companies of various sizes as well as from different industry sectors.

The results obtained in this Master Thesis clearly indicate that there is no relationship between CEO bonus and company performance among Sweden’s Listed Companies. However, certain incentive variables have been identified as important performance boosters among companies in certain sectors. We have also been able to establish that some of the previous theories regarding incentive contracts hold true among companies of certain sizes, and among companies from certain sectors.