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The Dependence Of Pay-Performance Sensitivity On The Size Of The Firm Author info | Abstract | Publisher info | Download info | Related research | Statistics Scott Schaefer
I analyze the relationship between firm size and the extent to which executive compensation depends on the wealth of the firm's shareholders. I use a simple agency model to motivate an econometric model of this relationship. Estimating this model on chief executive officer (CEO) compensation data using nonlinear least squares, I determine that pay-performance sensitivity (as defined by Jensen and Murphy (1990b)) appears to be approximately inversely proportional to the square root of firm size (however measured). I also analyze the properties of pay- performance sensitivity for "teams" of executives working for the same firm and show it to have similar properties as CEO pay-performance sensitivity. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
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Article provided by MIT Press in its journal The Review of Economics and Statistics .
Volume (Year): 80 (1998)
Issue (Month): 3 (August)
Pages: 436-443
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Handle: RePEc:tpr:restat:v:80:y:1998:i:3:p:436-443Contact details of provider: Web page: http://mitpress.mit.edu/journals/
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