Managerial Attributes and Executive Compensation

61 Pages Posted: 30 Aug 2011

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Si Li

Wilfrid Laurier University - School of Business & Economics

Jiaping Qiu

McMaster University - Michael G. DeGroote School of Business

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Date Written: August 2011

Abstract

We study the role of firm- and manager-specific heterogeneities in executive compensation. We decompose the variation in executive compensation and find that time invariant firm and especially manager fixed effects explain a majority of the variation in executive pay. We then show that in many settings, it is important to include fixed effects to mitigate potential omitted variable bias. Furthermore, we find that compensation fixed effects are significantly correlated with management styles (i.e., manager fixed effects in corporate policies). Finally, the method used in the paper has a number of potential applications in financial economics.

Suggested Citation

Graham, John Robert and Li, Si and Qiu, Jiaping, Managerial Attributes and Executive Compensation (August 2011). NBER Working Paper No. w17368. Available at SSRN: https://ssrn.com/abstract=1919442

John Robert Graham (Contact Author)

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Si Li

Wilfrid Laurier University - School of Business & Economics ( email )

Waterloo, Ontario N2L 3C5
Canada

Jiaping Qiu

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

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