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Dynamics and Convergence in Chief Executive Officer Pay

Author

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  • Hristos Doucouliagos

    ()

  • Michael Graham

    ()

  • Janto Haman

    ()

Abstract

This study investigates dynamics and convergence in CEO pay in Australia’s largest corporations over an 18 year period. Utilizing dynamic panel estimators, we find that CEO pay is driven by dynamic adjustments, firm size, board size, CEO tenure and firm performance. The largest pay-performance effect emerges for long-term incentive pay. We also show that by ignoring dynamics, prior studies may have understated the size of payperformance effects. Analysis of convergence shows a clear pattern of catch up among firms making CEO pay more equitable over time. The analysis points to efficiency in CEO remuneration contracts rather than managerial entrenchment.

Suggested Citation

  • Hristos Doucouliagos & Michael Graham & Janto Haman, 2012. "Dynamics and Convergence in Chief Executive Officer Pay," Economics Series 2012_3, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  • Handle: RePEc:dkn:econwp:eco_2012_3
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    File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2012_3.pdf
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    References listed on IDEAS

    as
    1. Arndt Channing & Jones Sam & Tarp Finn, 2010. "Aid, Growth, and Development: Have We Come Full Circle?," Journal of Globalization and Development, De Gruyter, vol. 1(2), pages 1-29, December.
    2. Hristos Doucouliagos & Martin Paldam, 2010. "Conditional aid effectiveness: A meta-study," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(4), pages 391-410.
    3. Steven B. Caudill & Randall G. Holcombe, 1999. "Specification Search and Levels of Significance in Econometric Models," Eastern Economic Journal, Eastern Economic Association, vol. 25(3), pages 289-300, Summer.
    4. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages 191-216, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    CEO Pay; Dynamic Panel Data Analysis; Pay for Performance; Convergence;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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