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Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records


  • Minoru Nakazato
  • J. Mark Ramseyer
  • Eric B. Rasmusen


Most studies of executive compensation have data on pay but not total income. Because exchange-listed Japanese firms (unlike exchange-listed U.S. firms) need not disclose executive compensation figures in their securities filings, most studies on Japan lack even good data on pay. Through 2004, however, the Japanese tax office disclosed the tax liabilities of the 73,000 Japanese with the highest incomes. We obtained this data, and match the high-tax list against the list of CEOs of the firms listed on Section 1 of the Tokyo Stock Exchange. We thus estimate salaries and risk exposure in a new way. We confirm survey and anecdotal evidence that Japanese executives earn less than American -- about one-fifth the pay, adjusting for firm size and outside income. Tobit regressions show that pay in Japan depends heavily on firm size (a .22 elasticity) and on accounting profitability, but not on stock returns. Additionally, family-owned firms and those with large lead shareholders pay less to employee CEOs not in the family or with large shareholdings, as do firms whose directors have less tenure on the board.
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Suggested Citation

  • Minoru Nakazato & J. Mark Ramseyer & Eric B. Rasmusen, 2011. "Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 843-885, September.
  • Handle: RePEc:bla:jemstr:v:20:y:2011:i:3:p:843-885

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    References listed on IDEAS

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    Cited by:

    1. Marie-Ann Betschinger, 2015. "Do banks matter for the risk of a firm's investment portfolio? Evidence from foreign direct investment programs," Strategic Management Journal, Wiley Blackwell, vol. 36(8), pages 1264-1276, August.

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