Dynamics and Convergence in Chief Executive Officer Pay

44 Pages Posted: 3 Apr 2012 Last revised: 19 Jul 2012

See all articles by Hristos Doucouliagos

Hristos Doucouliagos

Deakin University - School of Accounting, Economics and Finance

Michael Graham

Stockholm University - School of Business

Janto Haman

Monash University

Date Written: July 19, 2012

Abstract

This study offers the first investigation of dynamics and convergence in CEO total, bonus and long-term incentive pay in Australia’s largest corporations. Utilizing dynamic panel estimators, we find robust evidence of the dynamic nature of CEO pay determination. CEO pay is positively associated with lagged performance, with the largest pay-performance effect emerging for long-term incentive pay. We also show that by ignoring dynamics, prior studies may have understated the size of pay-performance effects. Analysis of convergence shows a clear pattern of catch up among firms. We conclude that both dynamic adjustments and convergence have contributed to large CEO pay increases in recent decades.

Keywords: CEO Pay, Dynamic Panel Data Analysis, Pay for Performance, Convergence

JEL Classification: G30, J33, M52

Suggested Citation

Doucouliagos, Chris (Hristos) and Graham, Michael and Haman, Janto, Dynamics and Convergence in Chief Executive Officer Pay (July 19, 2012). Available at SSRN: https://ssrn.com/abstract=2033535 or http://dx.doi.org/10.2139/ssrn.2033535

Chris (Hristos) Doucouliagos (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

Burwood, Victoria 3215
Australia

Michael Graham

Stockholm University - School of Business ( email )

Roslagsvägen 1010
Stockholm, SE-106 91
Sweden
+ 46 8 674 7451 (Phone)

HOME PAGE: www.fek.su.se

Janto Haman

Monash University ( email )

Caulfield, Victoria 3145
Australia

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