Executive Compensation and Macroeconomic Fluctuations
AbstractMacroeconomic fluctuations affect corporations’ performance through demand and cost conditions. Incentive effects of performance-based compensation schemes for management may be weakened or biased by macroeconomic influences if management is unable to forecast macroeconomic fluctuations or unable to adjust operations in response to changes in macroeconomic conditions. In this paper we analyze the impact of macroeconomic, industry and firm-specific factors on salaries and bonus of CEOs in 131 Swedish corporations during the period 2001–2006. A distinction is made between anticipated and unanticipated macroeconomic fluctuations. The macroeconomic influences on performance and compensation can be expected to vary from firm to firm in terms of magnitude of effects, as well as in terms of relevant macroeconomic variables. The estimates obtained in this paper refer to the average impact across the sample of firms. We find that the average Swedish CEOs’ compensation is explained to a substantial extent by macroeconomic factors; less so by unanticipated factors alone.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 746.
Length: 37 pages
Date of creation: 21 Apr 2008
Date of revision:
Publication status: Forthcoming in Markets and Compensation for Executives in Europe, Oxelheim, Lars, Wihlborg, Clas (eds.), Emerald Publishing, Bingley, UK.
Contact details of provider:
Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
More information through EDIRC
Executive Compensation; Macroeconomic Factors; Cash Compensation;
Other versions of this item:
- Oxelheim, Lars & Wihlborg, Clas & Zhang, Jianhua, 2008. "Executive Compensation and Macroeconomic Fluctuations," Working Papers in Economics 301, University of Gothenburg, Department of Economics.
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-05 (All new papers)
- NEP-BEC-2008-07-05 (Business Economics)
- NEP-MAC-2008-07-05 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John M. Abowd, 1990. "Does performance-based managerial compensation affect corporate performance?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 52-73, February.
- Coughlan, Anne T. & Schmidt, Ronald M., 1985. "Executive compensation, management turnover, and firm performance : An empirical investigation," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 43-66, April.
- Kevin J. Murphy, 1986. "Incentives, Learning, and Compensation: A Theoretical and Empirical Investigation of Managerial Labor Contracts," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 59-76, Spring.
- Lars Oxelheim & Clas Wihlborg, 2003.
"Recognizing Macroeconomic Fluctuations In Value Based Management,"
Journal of Applied Corporate Finance,
Morgan Stanley, vol. 15(4), pages 104-110.
- Oxelheim, Lars & Wihlborg, Clas, 2002. "Recognizing Macroeconomic Fluctuations in Value Based Management," Working Paper Series 574, Research Institute of Industrial Economics.
- Robert Gibbons & Kevin Murphy, 1989.
"Relative Performance Evaluation for Chief Executive Officers,"
628, Princeton University, Department of Economics, Industrial Relations Section..
- Robert Gibbons & Kevin J. Murphy, 1990. "Relative performance evaluation for chief executive officers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 30-51, February.
- Gibbons, R. & Murphy, K.J., 1989. "Relative Performance Evaluation For Chief Executive Officers," Working papers 532, Massachusetts Institute of Technology (MIT), Department of Economics.
- Robert Gibbons & Kevin J. Murphy, 1991. "Relative Performance Evaluation for Chief Executive Officers," NBER Working Papers 2944, National Bureau of Economic Research, Inc.
- Lucian Bebchuk, 2005.
"The Growth of Executive Pay,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 21(2), pages 283-303, Summer.
- Ciscel, David H & Carroll, Thomas M, 1980. "The Determinants of Executive Salaries: An Econometric Survey," The Review of Economics and Statistics, MIT Press, vol. 62(1), pages 7-13, February.
- Smith, Clifford W. & Stulz, René M., 1985. "The Determinants of Firms' Hedging Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(04), pages 391-405, December.
- Jonathan S. Leonard, 1990. "Executive pay and firm performance," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 13-29, February.
- Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
- Murphy, Kevin J., 1985. "Corporate performance and managerial remuneration : An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 11-42, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisabeth Gustafsson).
If references are entirely missing, you can add them using this form.