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Board size, director compensation, and firm transition across stock exchanges: evidence from Canada

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Abstract

In this study, we examine the relationship between the role and compensation structure of non-executive directors when firms on the TSX Venture Exchange (TSX-V) move to the Toronto Stock Exchange (TSX-C) in Canada. Using data from 156 listed firms, we find that graduating TSX-V firms employ relatively larger number of nonexecutive directors and pay them a higher proportion of contingent compensation than do the TSX-C firms. The graduated firms also provide non-executive outside directors with more components of compensation package. However, we find no support for the hypothesis that a TSX-V firm would pay a higher average director compensation in order to graduate. We also find that increases in the total amount and the components of compensation package are consistent with the shift in emphasis from resource dependence to monitoring in the same firm following its graduation from TSX-V to TSXC. The study’s implications are given.

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Notes

  1. A Probit analysis also produced identical results.

  2. The purpose of the OLS is to find out how the explanatory variables are linearly related to each of the seven director compensation types. The nature of the correlations between the explanatory variables and the compensation variables is similar as indicated by Table 6, and so is the significance of the coefficients associated with the explanatory variables. But the magnitudes of the coefficients are different from those of Table 6. The results of the OLS and logistic regression show that the directions (i.e., positive or negative relationships) of the relationships are consistent with each other. This is what we wanted.

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Author notes

  1. Shamsud D. Chowdhury and Eric Zengxiang Wang contributed equally to this paper. Their names appear in alphabetical order.

Authors and Affiliations

  1. Rowe School of Business, Dalhousie University, Halifax, NS, Canada

    Shamsud D. Chowdhury

  2. Faculty of Business, Athabasca University, Athabasca, AB, Canada

    Eric Zengxiang Wang

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  1. Shamsud D. Chowdhury
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  2. Eric Zengxiang Wang
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Correspondence to Shamsud D. Chowdhury.

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Chowdhury, S.D., Wang, E.Z. Board size, director compensation, and firm transition across stock exchanges: evidence from Canada. J Manag Gov 24, 685–712 (2020). https://doi.org/10.1007/s10997-019-09481-1

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