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The Market for CEOs: Building Legacy and Feeling Empowered Matter

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Listed:
  • Dupuy, Arnaud

    (University of Luxembourg)

  • Kennes, John

    (Aarhus University)

  • Lyng, Ran Sun

    (University of Toronto)

Abstract

We develop a two-sided multidimensional matching model of the market for CEOs that allows for both pecuniary and non-pecuniary (amenity) compensation. The model is estimated by maximum likelihood estimation using matched CEO-firm data from Denmark. We show that CEOs have preferences for building legacy and gaining empowerment. The legacy mechanism explains why there is low mobility in the CEO market, even though firms demand general CEO skills. The empowerment mechanism explains why CEOs are willing to sacrifice significant pecuniary income to manage high equity firms. The overall conclusion is that job amenities matter in the market for CEOs.

Suggested Citation

  • Dupuy, Arnaud & Kennes, John & Lyng, Ran Sun, 2021. "The Market for CEOs: Building Legacy and Feeling Empowered Matter," IZA Discussion Papers 14803, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14803
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    References listed on IDEAS

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    Cited by:

    1. Liang Chen & Eugene Choo & Alfred Galichon & Simon Weber, 2023. "Existence of a Competitive Equilibrium with Substitutes, with Applications to Matching and Discrete Choice Models," Papers 2309.11416, arXiv.org.

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    More about this item

    Keywords

    multidimensional matching; observed transfers; structural estimation; value of job amenities; taxation; CEO compensation; CEO performance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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