Managerial Attributes and Executive Compensation
John R. Graham
Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)
Wilfrid Laurier University - School of Business & Economics
McMaster University - Michael G. DeGroote School of Business
NBER Working Paper No. w17368
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.
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Number of Pages in PDF File: 61working papers series
Date posted: August 30, 2011
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