Abstract

http://ssrn.com/abstract=1659353
 
 

References (90)



 
 

Citations (1)



 


 



CEO Pay-for-Complexity and the Risk of Managerial Diversion from Multinational Diversification


Dirk E. Black


Duke University - Fuqua School of Business

Shane S. Dikolli


Duke University - Fuqua School of Business

Scott Dyreng


Duke University

August 31, 2012

AAA 2011 Management Accounting Section (MAS) Meeting Paper

Abstract:     
Prior studies find that CEOs receive higher pay if the enterprise is more complex because more complex enterprises are, in theory, matched with the managerial skills of higher-ability CEOs. While multinational diversification is typically a characteristic of enterprise complexity, we argue that multinational diversification also introduces a risk that executives will divert an enterprise’s resources to obtain private benefits. We first establish that CEO pay is, on average, increasing in the extent of multinational diversification, consistent with intuition that more complex enterprises are matched to higher‐ability CEOs. We then demonstrate that the CEO pay‐for‐complexity premium is lower if the multinational diversification reflects a relatively high risk of managerial diversion. For sufficiently high levels of multinational diversification accompanied by a high risk of managerial diversion, we find that CEOs receive a relative reduction in pay rather than a pay premium for multinational diversification. We also find evidence that this pay effect occurs in part through adjustments to a CEO’s pay‐for‐performance sensitivity.

Number of Pages in PDF File: 59

Keywords: CEO compensation, diversification, complexity

JEL Classification: J31, J33

working papers series


Download This Paper

Date posted: August 17, 2010 ; Last revised: September 3, 2012

Suggested Citation

Black, Dirk E. and Dikolli, Shane S. and Dyreng, Scott, CEO Pay-for-Complexity and the Risk of Managerial Diversion from Multinational Diversification (August 31, 2012). AAA 2011 Management Accounting Section (MAS) Meeting Paper. Available at SSRN: http://ssrn.com/abstract=1659353 or http://dx.doi.org/10.2139/ssrn.1659353

Contact Information

Dirk E. Black
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
Shane Sami Dikolli (Contact Author)
Duke University - Fuqua School of Business ( email )
100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-1949 (Phone)
919-869-1901 (Fax)
Scott Dyreng
Duke University ( email )
Box 90120, Fuqua School of Business
Durham, NC 27708-0120
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,963
Downloads: 260
Download Rank: 64,243
References:  90
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.406 seconds