The Equity Mix in Executive Compensation: An Investigation of Cross-Country Differences

40 Pages Posted: 12 May 2002

See all articles by Stephen H. Bryan

Stephen H. Bryan

Wake Forest University

Robert C. Nash

Wake Forest University

Ajay Patel

Wake Forest University, School of Business

Abstract

Why do firms from some countries use no equity in the compensation mix, while others use amounts equivalent to that observed in the U.S.? We examine this issue by investigating compensation data from 317 firms in 43 countries over the 1996 to 2000 period. We find that firms from countries with equity-oriented capital markets, and from countries where shareholder rights are strong, tend to use more equity in the compensation mix. After controlling for these country-level macro-factors, we also find that firms with higher growth opportunities use more equity in the compensation mix. This is consistent with the predictions of contracting theory. However, unlike previous findings for U.S. firms, equity compensation for the foreign firms in our sample is unrelated to proxies for asset substitution, event risk, firm size, or the difficulty in monitoring a firm's activities.

JEL Classification: G34

Suggested Citation

Bryan, Stephen H. and Nash, Robert C. and Patel, Ajay, The Equity Mix in Executive Compensation: An Investigation of Cross-Country Differences. EFA 2002 Berlin Meetings Presented Paper; EFMA 2002 London Meetings. Available at SSRN: https://ssrn.com/abstract=311781 or http://dx.doi.org/10.2139/ssrn.311781

Stephen H. Bryan (Contact Author)

Wake Forest University ( email )

7659 Reynolda Station
Winston-Salem, NC 27106
United States
336-758-3671 (Phone)

Robert C. Nash

Wake Forest University ( email )

2601 Wake Forest Road
Winston-Salem, NC 27109
United States

Ajay Patel

Wake Forest University, School of Business ( email )

1834 Wake Forest Road
Building 60, Farrell Hall
Winston-Salem, NC 27106
United States
336-758-5575 (Phone)
336-758-4514 (Fax)

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