Pre-CEO Executive Skill Accumulation, Firm Size and Pay Limits in the CEO Market

50 Pages Posted: 30 Mar 2016 Last revised: 6 Apr 2017

See all articles by Seungjin Han

Seungjin Han

McMaster University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 22, 2017

Abstract

This paper studies costly pre-CEO executive skill accumulation by executives, followed by stable matching between firms and CEOs. An increase in the heterogeneity of firm size relative to executive type induces a decrease in the informational effect of skill accumulation, resulting in improvement of efficiency. It shows that the CEO pay limit changes not only equilibrium pays to high paid CEOs but equilibrium pays to all CEOs. Severe CEO pay limits make CEO pay discontinuous at the top, so redistribution of earnings at the low-end of firm-CEO matches comes at the cost of distorting high ability executives' equilibrium skill accumulation.

Keywords: CEO pay limits, Pre-CEO executive skill accumulation, Firm-CEO matching

JEL Classification: G32, M12, M52

Suggested Citation

Han, Seungjin, Pre-CEO Executive Skill Accumulation, Firm Size and Pay Limits in the CEO Market (March 22, 2017). Available at SSRN: https://ssrn.com/abstract=2756001 or http://dx.doi.org/10.2139/ssrn.2756001

Seungjin Han (Contact Author)

McMaster University - Department of Economics ( email )

Hamilton, Ontario L8S 4M4
Canada

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