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Management Quality, Firm Size, And Managerial Compensation: A Comparison Between Germany And The Uk

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  • Steffen Brenner
  • Joachim Schwalbach

Abstract

This paper considers the relation between management quality, firm size, and managerial compensation. Exploring a German (SOEP) and a British (BHPS) data set we show that the impact of firm size on pay, which is consistently found in the management literature, vanishes (to a large extent) if it is controlled for manager quality. For the UK, we even find negative firm size elasticities. Different corporate governance systems may explain that in Germany the pay/firm size relation can only be partially explained by management quality measures. The impact of manager quality on firm size appears predominantly in the stochastic individual effects. Only for the German sample is the education/firm size-relation significant. Whether this surprising result is due to measurement problems deserves further attention.

Suggested Citation

  • Steffen Brenner & Joachim Schwalbach, 2003. "Management Quality, Firm Size, And Managerial Compensation: A Comparison Between Germany And The Uk," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 55(4), pages 280-293, October.
  • Handle: RePEc:sbr:abstra:v:55:y:2003:i:4:280-293
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    References listed on IDEAS

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    Cited by:

    1. Grund, Christian & Walter, Tanja, 2013. "Management Compensation and the Economic Crisis: Longitudinal Evidence from the German Chemical Sector," IZA Discussion Papers 7435, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Firm Size; Manager Compensation; Returns to Education; Unobserved Ability.;

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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