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http://ssrn.com/abstract=1107280
 
 

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The Effect of Social Pressures on CEO Compensation


James S. Ang


Florida State University

Gregory Leo Nagel


Middle Tennessee State University

Jun Yang


Indiana University - Kelley School of Business - Department of Finance

November 17, 2014


Abstract:     
We find that social pressures have a positive effect on CEO compensation. Social pressures come from frequent interactions with other CEOs and wealthy people (Forbes 400 people and social elites) in the local area; from attending industry, alumni, and charitable events; and from displaying and comparing wealth through luxury homes. Pay premiums associated with social pressures (social premiums) are calculated after incorporating the effect of other pay determinants: local economic conditions, firm characteristics and performance, and corporate governance. We show that social premiums are lower when the physical distance is longer and social interactions less frequent. Our results hold in a pay change regression. They are also robust to adding state fixed effects and firm fixed effects, and to controlling for the industry pay norm.

Number of Pages in PDF File: 45

Keywords: CEO compensation; social interactions; comparison groups.

JEL Classification: G3, J31, J33

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Date posted: March 25, 2008 ; Last revised: November 17, 2014

Suggested Citation

Ang , James S. and Nagel, Gregory Leo and Yang, Jun, The Effect of Social Pressures on CEO Compensation (November 17, 2014). Available at SSRN: http://ssrn.com/abstract=1107280 or http://dx.doi.org/10.2139/ssrn.1107280

Contact Information

James S. Ang
Florida State University ( email )
College of Business
Tallahassee, FL 32306-1042
United States
904-644-8208 (Phone)
Gregory Leo Nagel
Middle Tennessee State University ( email )
P.O. Box 50
Murfreesboro, TN 37132
United States
Jun Yang (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3395 (Phone)
812-855-5875 (Fax)

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