Executive Incentive Compensation and Economic Prosperity
MARKETS AND COMPENSATION FOR EXECUTIVES IN EUROPE, Oxelheim, L. and C. Wihlborg, eds., Bingley: Emerald Publishing, 2008
Posted: 19 Jun 2008 Last revised: 30 Jun 2020
Date Written: June 17, 2008
This paper analyzes the existence of a potential link between the prevalence of long term incentive compensation schemes and the economic prosperity of a country. This issue is previously not addressed in the literature. In a panel regression with fixed effects a strongly significant, positive effect is found between growth of GDP/capita in real terms and this prevalence, while controlling for general investment and institutional variables. However, when the 22 countries of the study are divided into European and non-European, the growth effect found for the entire material accrues only to the non-European countries. It is concluded that long term incentive contracts seem to have no effect in the European countries due to labor market and cultural reasons.
Keywords: Executive compensation, economic growth, investment ratio, long term incentive
JEL Classification: G34, G38, M14, M52, M55
Suggested Citation: Suggested Citation