The Impact of Firm Prestige on Executive Compensation

63 Pages Posted: 22 Feb 2012 Last revised: 7 Jan 2016

See all articles by Florens Focke

Florens Focke

University of Mannheim - Department of International Finance

Ernst G. Maug

University of Mannheim Business School; European Corporate Governance Institute (ECGI)

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance

Date Written: January 6, 2016

Abstract

We show that CEOs of prestigious firms earn less. Total compensation is on average 8% lower for firms listed in Fortune's ranking of America's most admired companies. We suggest that CEOs are willing to trade off status and career benefits from working for a publicly admired company against additional monetary compensation. Our identification strategy is based on matched sample analyses, difference-in-differences regressions, and a regression discontinuity design. We perform several robustness checks and exclude many alternative explanations, including that firm prestige just proxies for better corporate governance, or for increased exposure of the pay-setting process to media attention.

Keywords: CEO compensation, firm prestige, social status, career benefits

JEL Classification: G30, M52

Suggested Citation

Focke, Florens and Maug, Ernst G. and Niessen-Ruenzi, Alexandra, The Impact of Firm Prestige on Executive Compensation (January 6, 2016). AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2008877 or http://dx.doi.org/10.2139/ssrn.2008877

Florens Focke

University of Mannheim - Department of International Finance ( email )

L9, 1-2
Mannheim, 68131
Germany

Ernst G. Maug

University of Mannheim Business School ( email )

L9, 1-2
Mannheim, 68131
Germany
+49 621 181-1952 (Phone)

HOME PAGE: http://cf.bwl.uni-mannheim.de/de/people/maug/

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Alexandra Niessen-Ruenzi (Contact Author)

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

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