Cronyism and Delaware Incorporation: An Examination on Excess Compensation

Qian Xie


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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Accounting and Finance Research
ISSN 1927-5986 (Print)   ISSN 1927-5994 (Online) Email:

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