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The influence of long-term managerial orientation on pay inequality

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  • Liao, Chen-Chieh
  • Yeh, Yin-Hua

Abstract

This paper examines the relationship between a firm's long-term managerial orientation and in-firm pay inequality. We exploit two exogenous shocks to firms’ long-term orientation, in the form of inheritance and estate tax changes in Taiwan in 2008 and 2017. Using over a decade's worth of pay inequality data, we demonstrate that a more (less) long-term managerial orientation in a firm, driven by decreases (increases) in estate tax, leads to an increase (decrease) of in-firm pay inequality. Further analysis suggests that changes in-firm pay inequality are associated with changes in executive compensation, rather than with changes in ordinary employee compensation. Furthermore, our results are more pronounced in firms with higher degrees of family ownership and firms in more competitive industries. This paper suggests policy implications for amendments to estate tax since in-firm pay inequality will increase as a result of decreases in estate tax, via effects on firms’ long-term managerial orientation.

Suggested Citation

  • Liao, Chen-Chieh & Yeh, Yin-Hua, 2025. "The influence of long-term managerial orientation on pay inequality," Journal of Empirical Finance, Elsevier, vol. 82(C).
  • Handle: RePEc:eee:empfin:v:82:y:2025:i:c:s0927539825000349
    DOI: 10.1016/j.jempfin.2025.101612
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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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