Determinants of Executive Compensation in Privately Held Firms

30 Pages Posted: 24 Aug 2010

See all articles by Jesper Møller Banghøj

Jesper Møller Banghøj

Copenhagen Business School

Gorm Gabrielsen

Copenhagen Business School

Christian Petersen

Copenhagen Business School

Thomas Plenborg

Copenhagen Business School

Abstract

We examine what determines executive compensation in privately held firms. Our study is motivated by the fact that most studies in this area rely on data from publicly traded firms. Further, the few studies that are based on data from privately held firms only examine a limited number of determinants of executive compensation. Our findings indicate that the pay-to-performance relation is weak. Board size and ownership concentration are the only corporate governance characteristics that explain variations in executive compensation. Executive characteristics like skills, title and educational attainment all explain variations in executive compensation. Contrary to our expectations, we do not find a stronger pay-to-performance relation in firms with better designed bonus plans.

Suggested Citation

Banghøj, Jesper Møller and Gabrielsen, Gorm and Petersen, Christian and Plenborg, Thomas, Determinants of Executive Compensation in Privately Held Firms. Accounting & Finance, Vol. 50, No. 3, pp. 481-510, September 2010, Available at SSRN: https://ssrn.com/abstract=1661364 or http://dx.doi.org/10.1111/j.1467-629X.2009.00335.x

Jesper Møller Banghøj (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Gorm Gabrielsen

Copenhagen Business School ( email )

Statistics Group
Solbjerg Plads 3
DK - 2000 Frederiksberg
Denmark
+45 38153512 (Phone)
+45 38153500 (Fax)

Christian Petersen

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Thomas Plenborg

Copenhagen Business School ( email )

Department of Accounting & Auditing
Solbjerg Plads 3
DK - 2000 Frederiksberg
Denmark

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