Monetary Reference Points of Managers: An Empirical Investigation of Status Quo Preferences and Social Comparisons

45 Pages Posted: 5 Jan 2013

See all articles by Christian Grund

Christian Grund

RWTH Aachen University - School of Economics and Business Administration; IZA Institute of Labor Economics

Johannes Martin

RWTH Aachen University - School of Business and Economics

Abstract

We assemble two reference point based concepts of utility in our empirical study: the own previous status quo and social comparisons. We explore the relative relevance of these concepts for total compensation as well as for different parts of the compensation package of managers. Making use of a unique panel data set of managers of the German chemical sector, we find that social comparisons of compensation indeed affect reported job satisfaction. Managers compare their total compensation (and fixed salary) with others in the chemical sector and report lower satisfaction scores when they earn less than similar managers. We find hardly any evidence for the relevance of status quo preferences.

Keywords: compensation, job satisfaction, reference points, social comparisons, status quo preferences

JEL Classification: M5, J28, J31

Suggested Citation

Grund, Christian and Martin, Johannes, Monetary Reference Points of Managers: An Empirical Investigation of Status Quo Preferences and Social Comparisons. IZA Discussion Paper No. 7097. Available at SSRN: https://ssrn.com/abstract=2196762

Christian Grund (Contact Author)

RWTH Aachen University - School of Economics and Business Administration ( email )

Aachen
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Johannes Martin

RWTH Aachen University - School of Business and Economics ( email )

Templergraben 64
52056 Aachen, 52056
Germany

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