The Economic Effects of Expanded Compensation Disclosures

85 Pages Posted: 25 Oct 2014 Last revised: 28 Jul 2020

See all articles by Brandon Gipper

Brandon Gipper

Stanford University Graduate School of Business

Date Written: July 2020


This paper analyzes the effects of expanded compensation disclosures on manager pay. For identification, I use the introduction of the Compensation Discussion and Analysis (CD&A) in the 2007 proxy season, a significant expansion in required compensation disclosures, to compare manager pay at firms with and without the disclosure in a difference-in-differences analysis. These disclosures are associated with increasing pay, contrary to the conventional wisdom that pay disclosures reduce pay levels via better shareholder monitoring. I hypothesize that enhanced ex ante disclosures of incentive plans reduce boards’ flexibility to make ex post adjustments or to use subjectivity and pressure boards toward more formulaic plans. Both effects impose higher payout risk on managers, leading to increased pay levels. Consistent with this hypothesis, the CD&A introduction is associated with lower likelihood to earn variable cash pay, greater use of formula-based pay, and higher pay at firms with more volatile measures of performance.

Keywords: Compensation Governance, Compensation Disclosures, Discussion and Analysis, Disclosure, Manager Pay

JEL Classification: J33, J38, M12, M41

Suggested Citation

Gipper, Brandon, The Economic Effects of Expanded Compensation Disclosures (July 2020). Journal of Accounting & Economics (JAE), Vol. 70, No. 1, 2020, Available at SSRN: or

Brandon Gipper (Contact Author)

Stanford University Graduate School of Business ( email )

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