Abstract

http://ssrn.com/abstract=1266680
 
 

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Managerial Attributes and Executive Compensation


John R. Graham


Duke University; National Bureau of Economic Research (NBER)

Si Li


Wilfrid Laurier University - School of Business & Economics

Jiaping Qiu


McMaster University - Michael G. DeGroote School of Business

June 6, 2011

Review of Financial Studies, Forthcoming
AFA 2010 Atlanta Meetings Paper

Abstract:     
We study the role of firm- and manager-specific heterogeneities in executive compensation. We decompose the variation in executive compensation and find that time invariant firm and especially manager fixed effects explain a majority of the variation in executive pay. We then show that in many settings, it is important to include fixed effects to mitigate potential omitted variable bias. Furthermore, we find that compensation fixed effects are significantly correlated with management styles (i.e., manager fixed effects in corporate policies). Finally, the method used in the paper has a number of potential applications in financial economics.

Number of Pages in PDF File: 61

Keywords: Executive compensation, CEO pay, latent managerial ability, human capital, fixed effects, manager fixed effects

JEL Classification: G3, G32, J24, J31, J33, C23

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Date posted: September 12, 2008 ; Last revised: June 9, 2011

Suggested Citation

Graham, John R. and Li, Si and Qiu, Jiaping, Managerial Attributes and Executive Compensation (June 6, 2011). Review of Financial Studies, Forthcoming; AFA 2010 Atlanta Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1266680

Contact Information

John Robert Graham (Contact Author)
Duke University ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Si Li
Wilfrid Laurier University - School of Business & Economics ( email )
Waterloo, Ontario N2L 3C5
Canada
Jiaping Qiu
McMaster University - Michael G. DeGroote School of Business ( email )
1280 Main Street West
Hamilton, L8S 4M4 Ontario
Canada
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