Is Cash Still King: Why Firms Offer Non-Wage Compensation and the Implications for Shareholder Value

58 Pages Posted: 19 Dec 2017  

Tim Liu

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Finance Area

Christos Makridis

Stanford University, Department of Economics, Students; Stanford University, School of Engineering, Management Science & Engineering, Students

Paige Ouimet

University of North Carolina at Chapel Hill

Elena Simintzi

University of British Columbia

Date Written: December 14, 2017

Abstract

Over the past 40 years, the share of non-wage benefits in employee compensation grew from 5% to 30%. Using disaggregated data from Glassdoor, we first document a series of stylized facts about the availability of non-wage benefits and how these benefits are correlated with firm characteristics. We subsequently test three non-mutually exclusive hypotheses explaining the cross-section of non-wage benefits: (i) tax advantages, (ii) attracting and retaining specific employee groups, and (iii) mitigating the disutility of work. We find empirical evidence in support of all three hypotheses. Moreover, firms with higher rated benefits exhibit larger ex-post equity returns, suggesting that differences in non-cash types of compensation are not fully priced by the market.

Suggested Citation

Liu, Tim and Makridis, Christos and Ouimet, Paige and Simintzi, Elena, Is Cash Still King: Why Firms Offer Non-Wage Compensation and the Implications for Shareholder Value (December 14, 2017). Available at SSRN: https://ssrn.com/abstract=3088067 or http://dx.doi.org/10.2139/ssrn.3088067

Tim Liu

University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Christos Makridis (Contact Author)

Stanford University, Department of Economics, Students ( email )

Stanford, CA
United States

Stanford University, School of Engineering, Management Science & Engineering, Students ( email )

473 Via Ortega
Stanford, CA 94305-9025
United States

Paige Ouimet

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Elena Simintzi

University of British Columbia ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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