Abstract

http://ssrn.com/abstract=1738083
 
 

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Which U.S. Market Interactions Affect CEO Pay? Evidence from U.K. Companies


Joseph Gerakos


University of Chicago - Booth School of Business

Joseph D. Piotroski


Stanford Graduate School of Business

Suraj Srinivasan


Harvard Business School

August 2012

Rock Center for Corporate Governance at Stanford University Working Paper No. 96
Management Science Journal, Forthcoming

Abstract:     
This paper examines how different types of interactions with U.S. markets by non-U.S. firms are associated with higher level of CEO pay, greater emphasis on incentive-based compensation, and smaller pay gap with U.S. firms. Using a sample of CEOs of U.K. firms and using both broad cross-sectional and narrow event-window tests, we find that capital market relationship in the form of an U.S. exchange listing is related to higher U.K CEO pay; however, the effect is similar when U.K. firms have a listing in any foreign country implying a foreign listing effect not unique to the U.S. Product market relationships measured by the extent of sales in the U.S. by U.K. companies are associated with higher pay, greater use of U.S.-style pay arrangements, and a reduction in the U.S.-U.K. pay gap. The product market effect is incremental to the effect of a U.S. exchange listing, the extent of the firm’s non-U.S. foreign market interactions, and the characteristics of the executive. The U.S-U.K. CEO pay gap reduces in U.K. firms that make U.S. acquisitions. Further, the firm’s use of a U.S. compensation consultant increases the sensitivity of U.K. pay practices to U.S. product market relationships.

Number of Pages in PDF File: 34

Keywords: CEO compensation, international pay, globalization, corporate governance, incentives, cross-listing, United Kingdom

JEL Classification: G32, G34, G38

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Date posted: January 11, 2011 ; Last revised: January 11, 2014

Suggested Citation

Gerakos, Joseph and Piotroski, Joseph D. and Srinivasan, Suraj, Which U.S. Market Interactions Affect CEO Pay? Evidence from U.K. Companies (August 2012). Management Science Journal, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1738083 or http://dx.doi.org/10.2139/ssrn.1738083

Contact Information

Joseph J. Gerakos
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Ave.
Chicago, IL 60637
United States
773-834-6882 (Phone)
Joseph D. Piotroski
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States

Suraj Srinivasan (Contact Author)
Harvard Business School ( email )
Soldiers Field
Boston, MA 02163
United States
HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=pub&facId=10700
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