Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records
University of Tokyo - Faculty of Law
J. Mark Ramseyer
Harvard Law School
Eric Bennett Rasmusen
Indiana University - Kelley School of Business - Department of Business Economics & Public Policy
Harvard Law and Economics Discussion Paper No. 567
Most studies of executive compensation have data on pay, but not on total income. Studies of executives in Japan do not even have good data on pay. Although we too lack direct data on Japanese salaries, from income tax filings we compile data on total executive incomes, and from financial records obtain some indication of which executives have substantial investment income. We find that Japanese executives earn far less than U.S. executives - holding firm size constant, about one-third the pay of their U.S. peers. Using tobit regression analysis, we further confirm that executive pay in Japan depends on firm size, with an elasticity of .24, but not on accounting profitability or stock returns. Corporate governance variables such as board composition have little or no effect on executive compensation, except that firms with large lead shareholders do appear to pay less.
Number of Pages in PDF File: 36
Keywords: Executive compensation, Japan, Incentive pay, Corporate governance
JEL Classification: D24, G30, G34, J31, J33, J44, K23, L84
Date posted: December 7, 2006
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