The Impact of CEO Long-Term Equity-Based Compensation Incentives on Economic Growth in Collectivist Versus Individualist Countries
Asian Economic Papers 15(2), 109–133
42 Pages Posted: 9 Oct 2015 Last revised: 27 Oct 2016
Date Written: September 15, 2015
Abstract
This study examines the impact of the prevalence of long-term equity-based CEO compensation incentives on GDP growth, and we address the moderating role of individualist versus collectivist cultures on this relationship. We argue long-term incentives given to CEOs in some firms may convey to other CEOs that they too may be able to receive such incentives and rewards if they emulate the incentivized and rewarded CEOs. In a longitudinal study across twenty-two nations over a five-year period, we find that when a higher proportion of CEOs in a country are awarded long-term equity-based incentive compensation, the greater future real GDP growth, particularly in collectivist countries.
Keywords: Executive compensation, CEO incentives, economic growth, individualist vs.collectivist countries
JEL Classification: G30, G32, G34
Suggested Citation: Suggested Citation