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Manchester Grand Hyatt, Seaport G
American Finance Association
Sunday, Jan. 5, 2020 10:15 AM - 12:15 PM (PDT)
- Chair: Efraim Benmelech, Northwestern University
CEO Marketability, Employment Opportunities, and Compensation: Evidence from Compensation Peer Citations
AbstractWe present evidence that the 2006 compensation-peer disclosure rule increased executive labor market efficiency by revealing information about executives’ outside opportunities. Difference-in-differences tests provide evidence of increased CEO mobility and compensation levels after the rule was enacted. Executives of firms with more peer citations – especially from larger firms – are more likely to leave for better positions or to receive compensation increases. Highly-cited firms are more likely to increase equity-based compensation, which helps with executive retention. These results are noteworthy since the intent of the rule was to limit opportunistic benchmarking to justify higher compensation.
Why Are CEOs of Public Firms Paid More Than CEOs of Private Firms? Evidence from the Effect of Board Reforms on CEO Compensation
AbstractCEOs of public firms earn more than their counterparts in similar private firms. This can either be because rent extraction is easier in public firms than in private firms or because managing a public firm requires additional legal and institutional responsibilities than does managing an otherwise similar private firm. Using corporate board reform events from 29 countries, we find that board reforms toward greater board diligence for public firms increases CEO pay significantly more for public firms than for private firms, which are not subject to those reforms. Following board reforms, CEO pay increases more for public firms that are subject to higher scrutiny, such as larger firms and firms that are followed by more analysts and institutional investors. These results are consistent with the efficient contracting view of CEO compensation but inconsistent with the rent extraction view.
University of British Columbia
- G3 - Corporate Finance and Governance