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Managerial Attributes and Executive Compensation

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  • John R. Graham
  • Si Li
  • Jiaping Qiu

Abstract

We study the role of firm- and manager-specific heterogeneities in executive compensation. We decompose the variation in executive compensation and find that time invariant firm and especially manager fixed effects explain a majority of the variation in executive pay. We then show that in many settings, it is important to include fixed effects to mitigate potential omitted variable bias. Furthermore, we find that compensation fixed effects are significantly correlated with management styles (i.e., manager fixed effects in corporate policies). Finally, the method used in the paper has a number of potential applications in financial economics.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17368.

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Date of creation: Aug 2011
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Publication status: published as Graham, John R., Si Li, and Jiaping Qiu, 2011, Managerial Attributes and Executive Compensation, Review of Financial Studies 24, 1944-1979.
Handle: RePEc:nbr:nberwo:17368

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Cited by:
  1. Carola Frydman & Raven Molloy, 2011. "Pay Cuts for the Boss: Executive Compensation in the 1940s," NBER Working Papers 17303, National Bureau of Economic Research, Inc.
  2. Ron Kaniel & Cade Massey & David T. Robinson, 2010. "The Importance of Being an Optimist: Evidence from Labor Markets," NBER Working Papers 16328, National Bureau of Economic Research, Inc.
  3. Michael Ewens & Matthew Rhodes-Kropf, . "Is the VC Partnership Greater than the Sum of its Partners?," GSIA Working Papers 2012-E36, Carnegie Mellon University, Tepper School of Business.
  4. Antonio Falato & Dan Li & Todd Milbourn, 2012. "CEO pay and the market for CEOs," Finance and Economics Discussion Series 2012-39, Board of Governors of the Federal Reserve System (U.S.).
  5. Zhiguo He & Si Li & Bin Wei & Jianfeng Yu, 2013. "Uncertainty, risk, and incentives: theory and evidence," Finance and Economics Discussion Series 2013-18, Board of Governors of the Federal Reserve System (U.S.).

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