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CEO Pay Slice as a measure of CEO dominance

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  • Zagonov, Maxim
  • Salganik-Shoshan, Galla

Abstract

CEO Pay Slice (CPS), a measure of CEO relative compensation introduced by Bebchuk, Cremers and Peyer [2011. Journal of Financial Economics 102, 199–221], is used widely in the literature as a proxy for chief executive officer dominance. Nonetheless, CPS does not control for the distribution of pay among the top executives and, as we show empirically, often misestimates the level of CEO power. As a result, its empirical application exposes researchers to the risk of drawing false conclusions. We propose a number of supplementary measures that could be used in conjunction with CPS to improve the measurement accuracy of CEO dominance.

Suggested Citation

  • Zagonov, Maxim & Salganik-Shoshan, Galla, 2018. "CEO Pay Slice as a measure of CEO dominance," Research in International Business and Finance, Elsevier, vol. 45(C), pages 571-576.
  • Handle: RePEc:eee:riibaf:v:45:y:2018:i:c:p:571-576
    DOI: 10.1016/j.ribaf.2017.07.092
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate governance; Executive compensation; Entrenchment; Pay distribution;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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