Do Common Inherited Beliefs and Values Influence CEO Pay?

56 Pages Posted: 26 Mar 2015 Last revised: 21 Nov 2017

See all articles by Atif Ellahie

Atif Ellahie

University of Utah - David Eccles School of Business

Ahmed Tahoun

London Business School

A. Irem Tuna

London Business School

Date Written: September 25, 2017

Abstract

We use the ethnicity of CEOs across 31 countries as a proxy for their common inherited beliefs and values and find an ethnicity effect in CEO variable pay. We find that the ethnicity effect in variable pay is not driven by the ethnicity effects in corporate policy decisions, and that changes in CEO compensation are significantly larger when CEOs are replaced with a person from a different ethnicity. Our estimated ethnicity effect captures the future time reference and religion of CEOs’ ancestors. Finally, we find an ethnicity effect in performance-firing sensitivities (i.e., the sensitivity to being fired due to poor performance).

Keywords: Executive compensation, CEO characteristics, ethnicity, cultural persistence

JEL Classification: G30, J15, J33, Z10

Suggested Citation

Ellahie, Atif and Tahoun, Ahmed and Tuna, Ayse Irem, Do Common Inherited Beliefs and Values Influence CEO Pay? (September 25, 2017). Journal of Accounting & Economics, 2017, 64 (2-3), 346-367. Available at SSRN: https://ssrn.com/abstract=2583952 or http://dx.doi.org/10.2139/ssrn.2583952

Atif Ellahie (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Ahmed Tahoun

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Ayse Irem Tuna

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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