Abstract

http://ssrn.com/abstract=2100499
 


 



Orders of Merit and CEO Compensation: Evidence from a Natural Experiment


Linus Siming


Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

July 4, 2012


Abstract:     
Governments worldwide bestow orders of merit upon their citizens as a recognition of distinguished service. In this paper, I develop hypotheses on how orders of merit can function as a tool for governments to impact pay at public corporations. The predictions are tested through an empirical analysis that revolves around the 1974 legal reform in which Sweden discontinued the conferral of orders of merit to citizens. The difference-in-difference methodology I employ enables me to make causal statements on the relationship between orders of merit, firm performance and monetary compensation. I find that orders of merit function as symbols that visibly confirm social status vis-à-vis the general public and are valued by CEOs as a substitute for the need to engage in conspicuous consumption. Essentially, orders of merit can be seen as an external form of perquisite through which the government can effectively subsidize part of the compensation for CEOs of privately owned firms.

Number of Pages in PDF File: 45

Keywords: Executive compensation, positional good, order of merit

JEL Classification: G30, J33

working papers series





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Date posted: October 16, 2014 ; Last revised: October 17, 2014

Suggested Citation

Siming, Linus, Orders of Merit and CEO Compensation: Evidence from a Natural Experiment (July 4, 2012). Available at SSRN: http://ssrn.com/abstract=2100499 or http://dx.doi.org/10.2139/ssrn.2100499

Contact Information

Linus Siming (Contact Author)
Bocconi University - Department of Finance ( email )
Via Roentgen 1
Milano, MI 20136
Italy
Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )
Via Roentgen 1
Milan, 20136
Italy
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