What can we learn from privately held firms about executive compensation?
AbstractThis study examines executive compensation using data from two nationally representative samples of privately held U.S. corporations conducted ten years apart—in 1993 and 2003—and uses these data to test a number of hypotheses. We find that: (i) the level of executive pay at privately held firms is higher at larger firms and varies widely by industry, consistent with stylized facts about executive pay at public companies; (ii) inflation-adjusted executive pay has fallen at privately held companies, in contrast with the widely documented run-up in executive pay at large public companies; (iii) the pay-size elasticity is much larger for privately held firms than for the publicly traded firms on which previous research has almost exclusively focused; (iv) executive pay is higher at more complex organizations; (v) organizational form affects taxation, which, in turn, affects executive pay, with executives at C-corporations being paid significantly more than executives at S-corporations; (vi) executive pay is inversely related to CEO ownership; (vii) executive pay is inversely related to financial risk; and (viii) executive pay is related to a number of CEO characteristics, including age, education and gender: executive pay has a quadratic relation with CEO age, a positive relation with educational, and is significantly lower for female executives.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 24668.
Date of creation: 04 Feb 2010
Date of revision:
CEO; compensation; education; executive; executive pay; gender; organizational form; ownership; SSBF; taxes;
Other versions of this item:
- Cole, Rebel & Mehran, Hamid, 2007. "What can we learn from privately held firms about executive compensation?," MPRA Paper 4710, University Library of Munich, Germany.
- Rebel A. Cole & Hamid Mehran, 2008. "What can we learn from privately held firms about executive compensation?," Staff Reports 314, Federal Reserve Bank of New York.
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-11 (All new papers)
- NEP-BEC-2010-09-11 (Business Economics)
- NEP-LAB-2010-09-11 (Labour Economics)
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