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Determinants of executive pay in small private firms–initial evidence from Germany

Author

Listed:
  • Jochen Bigus

    (Freie Universität Berlin)

  • Aline Grahn

    (Freie Universität Berlin)

  • Mustafa Karakaya

    (Freie Universität Berlin)

Abstract

This paper provides initial evidence on executive pay in small private limited liability firms in Germany. More than 80% of the firms report fewer than 50 employees. We find that executive pay increases with firm size and variable pay. We also find weak evidence that executive pay is lower in the presence of female executives, and increases with profitability. Surprisingly, variable pay is related in an inverted U-shape to total salary. Significant executive ownership (> 25%) is associated with higher compensation. Executive pay varies widely by region. Some, but not all results are in line with efficient contracting theory. In sum, we provide novel evidence on executive pay in small private firms outside the U.S.

Suggested Citation

  • Jochen Bigus & Aline Grahn & Mustafa Karakaya, 2024. "Determinants of executive pay in small private firms–initial evidence from Germany," Journal of Business Economics, Springer, vol. 94(1), pages 41-73, January.
    • Handle: RePEc:spr:jbecon:v:94:y:2024:i:1:d:10.1007_s11573-023-01150-y
    DOI: 10.1007/s11573-023-01150-y
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    More about this item

    Keywords

    Executive pay; Private firms; Germany; Executive ownership;
    All these keywords.

    JEL classification:

    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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