Católica Porto Business School invites its community to attend the next CEGE4ALL:Markets & Policy Seminar by Rohit Sonika, on “CEO Pay and the Complementarity of Compensation Components”.
Location: Católica Porto Business School, Paraíso Building, room EP002
Date: 11 April, 2025
Time: 11:30 a.m. to 12:30 p.m.
Format: hybrid - You can attend the seminar either online or in person
Please register by April 10th indicating if you will be attending in person or online.
Incentive ability of executive compensation depends partly on the complementarity between components in a compensation structure and how adjustments are made to this structure (Lambert, Larcker, and Verrecchia, 1991). Due to mandatory expensing of stock options under FAS 123R, we empirically ascertain the impact of addition or substitution of new equity components in a CEO’s compensation structure on pay-performance sensitivity, and, consequentially, on firm decision-making. Our findings reveal that firms engaging in substitution of new components in place of existing ones are more aggressive in reducing overall stock options held by a CEO, while also reducing the sensitivity of the compensation package. However, such downward adjustments do not lead to adverse behaviour with respect to firm investment or financing decisions. Adding firms, on the contrary, significantly increase overall compensation (while reducing overall stock option grants), with insignificant adjustment to sensitivities, leading to an aggregate loss in pay-performance relationship.
Rohit Sonika
Dr. Rohit Sonika is a visiting researcher at Hanken School of Economics in Helsinki, Finland. He specialises in payout policy and corporate governance and explores executive compensation, insider trading, and institutional investors.
Dr. Sonika earned his Ph.D. in Accounting and Finance from Lancaster University, where his dissertation examined conditional share repurchase decisions and strategic behaviour. He previously served as an assistant professor at the University of Exeter and has held visiting researcher positions at both Aalto University and Hanken School of Economics.
His research has been published in leading journals including the Journal of Banking & Finance, European Financial Management, and Financial Management. His recent work investigates the influence of CEO connections on stock repurchase timing, flexibility in share repurchases, and buyback behaviour related to option funding.
Dr. Sonika has presented his research at numerous international conferences including FMA, EFA, and EFMA. He also brings industry experience from roles at KPMG, EY, and PwC in Helsinki.
