When More Costs More: Board Compensation and Negative Stock Returns in the Nordic Market

Sammanfattning

This study examines the relationship between total board compensation and stock returns for publicly listed companies in the Nordics over the period 2020-2024. Previous research shows conflicting results, with a strong focus on the US, leaving the Nordic region largely unexplored. Using a quantitative method and fixed effects panel data analysis of 2,076 company years, with 648 unique companies, the results show a consistently negative relationship between board compensation and stock returns across all model specifications. However, the statistical robustness of this relationship depends heavily on methodological choices. Clustered standard errors lose significance, while the lagged model yields a weak but significant negative effect. These results lead to the rejection of the hypothesis that board compensation and stock performance in the Nordic markets are positively associated.These findings, within the theoretical framework of this thesis, suggest high board compensation may signal an agency problem rather than effective governance. Though Nordic institutional environments, characterized by concentrated ownership, high transparency, and independent boards, appear to partially dampen these effects. The study contributes to filling a geographical gap in corporate governance literature and highlights the importance of contextual and methodological sensitivity when examining compensation-performance relationships.