The current study examines the impact of executives' compensation on firm over-investment. It uses the panel data of 215 USA non-financial listed firms during the period 2007-2019, and it employs an explanatory research with secondary financial data. The study outcomes show that total executives' compensation is negatively associated with over-investment. It also found an insignificant relationship between over-investment and stock awards but a significant relationship with stock options, in addition to CEO compensation significantly reducing firms' overinvestments. The inverse relationship between executive compensations and over-investment is consistent with the agency cost hypothesis. Accordingly, the hypothesis that states that there is a positive relationship between executive compensation and over-investment is accepted.
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Elseoud et al. (2020) studied this question.
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