Determinants of Executive Compensation – Empirical Evidence from German Prime Standard Firms (Determinanten der Vorstandsvergütung – Eine empirische Untersuchung der deutschen Prime-Standard-Unternehmen)

Zeitschrift für Betriebswirtschaft, Vol. 80, pp. 1075–1112, 2010

CEFS Working Paper 07-2010

39 Pages Posted: 20 Feb 2010 Last revised: 30 Dec 2010

See all articles by Marc Steffen Rapp

Marc Steffen Rapp

University of Marburg - School of Business & Economics; University of Marburg - Marburg Centre for Institutional Economics (MACIE)

Michael Wolff

University of Göttingen

Date Written: July 28, 2010

Abstract

Using a novel, hand-collected data set covering all German non-financial firms listed in the Prime Standard of FWB (Frankfurt Stock Exchange), we examine determinants of executive compensation in German listed firms. We distinguish three potential determinants: firm characteristics, firm performance, and corporate governance characteristics. While we find that simple firm characteristics like size and industry affiliation together with time effects explain more than 60% of variation in overall compensation, performance characteristics are economically inconsequential for the explanation of compensation levels. When we distinguish between widely held firms and firms with a large blockholder, we find that the latter grant compensation packages that are smaller, less sensitive to the firm’s stock market performance but more sensitive to the firm’s operating performance. Finally, we confirm that supervisory board characteristics also affect the level of executive compensation in German firms. Overall, our findings suggest that although the corporate governance environment in Germany has changed dramatically during the last decade, German listed firms are still exposed to high agency costs.

Note: Downloadable document is in German.

Keywords: executive compensation, corporate governance, Germany, two-tier system

JEL Classification: G3, M52, J33

Suggested Citation

Rapp, Marc Steffen and Wolff, Michael, Determinants of Executive Compensation – Empirical Evidence from German Prime Standard Firms (Determinanten der Vorstandsvergütung – Eine empirische Untersuchung der deutschen Prime-Standard-Unternehmen) (July 28, 2010). Zeitschrift für Betriebswirtschaft, Vol. 80, pp. 1075–1112, 2010 . Available at SSRN: https://ssrn.com/abstract=1555654

Marc Steffen Rapp (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

University of Marburg - Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

Michael Wolff

University of Göttingen ( email )

Platz der Göttinger Sieben 3
Göttingen, DE 37073
Germany

HOME PAGE: http://www.contolling.uni-goettingen.de

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