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Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records

Minoru Nakazato
University of Tokyo - Faculty of Law

J. Mark Ramseyer
Harvard University - Harvard Law School

Eric Bennett Rasmusen
Indiana University Bloomington - Department of Business Economics & Public Policy


December 2006

Harvard Law and Economics Discussion Paper No. 567

Abstract:     
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.

Keywords: Executive compensation, Japan, Incentive pay, Corporate governance

JEL Classifications: D24, G30, G34, J31, J33, J44, K23, L84

Working Paper Series

Date posted: December 07, 2006 ; Last revised: November 04, 2008

Suggested Citation

Nakazato, Minoru, Ramseyer, J. Mark and Rasmusen, Eric Bennett, Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records (December 2006). Harvard Law and Economics Discussion Paper No. 567. Available at SSRN: http://ssrn.com/abstract=950365


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Contact Information

Minoru Nakazato (Contact Author)
University of Tokyo - Faculty of Law ( email )
7-3-1 Hongo Bunkyo-Ku
Tokyo 113
Japan
J. Mark Ramseyer
Harvard University - Harvard Law School ( email )
1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-496-4878 (Phone)
617-496-6118 (Fax)
Eric Bennett Rasmusen
Indiana University Bloomington - Department of Business Economics & Public Policy ( email )
Bloomington, IN 47405
United States
812-855-9219 (Phone)
812-855-3354 (Fax)
HOME PAGE: http://php.indiana.edu/~erasmuse
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