Research design and variable definition
This study aims at studying the effect of institutional shareholders on the total CEO
compensation in Sweden through an empirical and quantitative study. We construct our
dependent variables (cash compensation and total compensation) according to the method
used by Kole (1997) and Conyon and Murphy (2000). Total compensation consists of salary,
bonus, stock and stock option grants, pension and perk. Cash compensation is the sum of
fixed salary plus bonus. Our independent variables are institutional ownership
concentration (Top 5) and aggregation (Total-Top 5). Concentration is measured by
percentage of the sum of top 5 institutional shareholdings in firm’s total shares
outstanding and the aggregation is measured by the percentage of total institutional
shareholdings minus the top 5 institutional shareholdings in a firm’s total outstanding
shares.