Managerial compensation: Luck, skill or labor markets?
AbstractLuck, skill and labor markets all have empirical support as determinants of managerial compensation. We examine the relative importance of pay for luck, managerial skill and labor market opportunities in determining compensation. We measure luck as the predictable component of firm performance, measure skill using managerial fixed effects and measure labor market opportunities as the compensation of executives at matched firms. Our results imply that managerial skill is the most important determinant of managers' compensation, followed by firm size and labor market opportunities, and that luck is not an important determinant of managerial compensation.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Corporate Finance.
Volume (Year): 21 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/jcorpfin
Executive compensation; Human capital; Managerial ability;
Find related papers by JEL classification:
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J - Labor and Demographic Economics
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