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Dynamics and Convergence in Chief Executive Officer Pay

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  • Hristos Doucouliagos

    ()

  • Michael Graham

    ()

  • Janto Haman

    ()

Abstract

This study investigates dynamics and convergence in CEO pay in Australia’s largest corporations over an 18 year period. Utilizing dynamic panel estimators, we find that CEO pay is driven by dynamic adjustments, firm size, board size, CEO tenure and firm performance. The largest pay-performance effect emerges for long-term incentive pay. We also show that by ignoring dynamics, prior studies may have understated the size of payperformance effects. Analysis of convergence shows a clear pattern of catch up among firms making CEO pay more equitable over time. The analysis points to efficiency in CEO remuneration contracts rather than managerial entrenchment.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2012_3.pdf
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Bibliographic Info

Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2012_3.

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Date of creation: 21 Mar 2012
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Handle: RePEc:dkn:econwp:eco_2012_3

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Related research

Keywords: CEO Pay; Dynamic Panel Data Analysis; Pay for Performance; Convergence;

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