Determinants of Executive Compensation in Private Family Firms

38 Pages Posted: 17 Jan 2011

See all articles by Erlend Kvaal

Erlend Kvaal

BI Norwegian Business School

John Christian Langli

BI Norwegian Business School - Department of Accounting, Auditing and Business Analytics

Date Written: January 16, 2011

Abstract

We study patterns of CEO compensation in private family firms. We find that private family firms pay their CEO less than other private firms, and that the tendency of low CEO pay is stronger in family firms that have a family member as CEO. More than in other firms CEO pay in private family firms is positively associated with performance, which is contrary to some findings regarding public firms. Private family firms more than other private firms shield the CEO from business risk, in particular when the CEO is a member of the controlling family. We find that private family firms compensate their CEO for systematic risk, whereas non-family firms rather compensate for unsystematic risk.

Suggested Citation

Kvaal, Erlend and Langli, John Christian, Determinants of Executive Compensation in Private Family Firms (January 16, 2011). CAAA Annual Conference 2011, Available at SSRN: https://ssrn.com/abstract=1741982 or http://dx.doi.org/10.2139/ssrn.1741982

Erlend Kvaal (Contact Author)

BI Norwegian Business School ( email )

Department of Accounting, Auditing and Law
NO - 0442 Oslo
Norway

John Christian Langli

BI Norwegian Business School - Department of Accounting, Auditing and Business Analytics ( email )

N-0442 Oslo
Norway

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