On the Consequences of Mandatory CEO Pay Ratio Disclosure

46 Pages Posted: 10 Mar 2020 Last revised: 7 Jul 2020

See all articles by Lucas Knust

Lucas Knust

University of Zurich

David Oesch

University of Zurich

Date Written: July 3, 2020

Abstract

We examine the consequences of the highly anticipated and controversial Section 953(b) of the Dodd-Frank Act, which mandates companies to disclose the CEO-to-median employee pay ratio starting from 2018. We address endogeneity concerns by using a regression discontinuity design around the public float of companies. Contrary to one of the main arguments of the supporters of the rule, the disclosure requirement does not reduce CEO compensation. We also find no evidence that investors are substantially influenced by the disclosure since firms that disclose the ratio experience no change in investor attention and no change in say-on-pay voting outcomes.

Keywords: CEO-employee Pay Ratio Disclosure, CEO Compensation, Say-on-pay, Investor Attention, Google Search Volume

JEL Classification: G30, G38, M48

Suggested Citation

Knust, Lucas and Oesch, David, On the Consequences of Mandatory CEO Pay Ratio Disclosure (July 3, 2020). Available at SSRN: https://ssrn.com/abstract=3540009 or http://dx.doi.org/10.2139/ssrn.3540009

Lucas Knust

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

David Oesch (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
212
Abstract Views
856
rank
175,838
PlumX Metrics