Cronyism and Delaware Incorporation: An Examination on Excess Compensation

Qian Xie
November 2013
Accounting & Finance Research;Nov2013, Vol. 2 Issue 4, p60
Academic Journal
This paper investigates whether Delaware incorporation relates to cronyism by examining excess director and CEO compensation. I find that excess director compensation is significantly and positively related to excess CEO compensation in both Delaware and non-Delaware firms. However, excess CEO compensation in non-Delaware firms is negatively associated with firm performance. The result indicates that cronyism does exist in non-Delaware firms but not in Delaware firms. Therefore, Delaware incorporation does not favor managers at the expense of shareholders.


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