Culture and CEO Compensation

Stephen H. Bryan

Wake Forest University

Robert C. Nash

Wake Forest University

Ajay Patel

Wake Forest University, School of Business

July 30, 2014

AFA 2013 San Diego Meetings Paper

We present new insights regarding the determinants of the persistent differences in compensation structure across countries. This paper examines CEO compensation in 43 countries over the 1996 to 2009 period and specifically focuses on the additional explanatory power provided by considering how national culture affects contracting decisions. We find that culture matters. We begin by merging elements of the cross-cultural psychology and contracting literatures to identify cultural factors that theory predicts should affect agency conflicts. Since design of compensation structure is one means to address agency conflicts, we expect a relation between culture and contracting. Our empirical analysis confirms that cultural factors (measuring such societal traits as individualism and uncertainty avoidance) are significant determinants of the relative use of equity-based compensation. The cultural factors are strongly significant after controlling for the previously-identified determinants of CEO compensation structure relating to legal environment and firm-specific characteristics. By empirically verifying the strong relation between culture and compensation, we hope to contribute to a more comprehensive understanding of the interaction between informal institutions (e.g., national culture) and corporate decision-making.

Number of Pages in PDF File: 87

Keywords: Executive Compensation, Culture

JEL Classification: G34

Open PDF in Browser Download This Paper

Date posted: March 16, 2012 ; Last revised: July 31, 2014

Suggested Citation

Bryan, Stephen H. and Nash, Robert C. and Patel, Ajay, Culture and CEO Compensation (July 30, 2014). AFA 2013 San Diego Meetings Paper. Available at SSRN: http://ssrn.com/abstract=2023530 or http://dx.doi.org/10.2139/ssrn.2023530

Contact Information

Stephen H. Bryan
Wake Forest University ( email )
7659 Reynolda Station
Winston-Salem, NC 27106
United States
336-758-3671 (Phone)
Robert C. Nash (Contact Author)
Wake Forest University ( email )
2601 Wake Forest Road
Winston-Salem, NC 27109
United States
Ajay Patel
Wake Forest University, School of Business ( email )
1834 Wake Forest Road
Building 60, Farrell Hall
Winston-Salem, NC 27106
United States
336-758-5575 (Phone)
336-758-4514 (Fax)
Feedback to SSRN

Paper statistics
Abstract Views: 4,845
Downloads: 697
Download Rank: 23,040

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.344 seconds