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Are CEOs in Family Firms Paid Like Bureaucrats? Evidence from Bayesian and Frequentist Analyses

  • Jörn Hendrich Block

The relationship between CEO pay and performance has been much analyzed in the management and economics literature. This study analyzes the structure of executive compensation in family and non-family firms. In line with predictions of agency theory, it is found that the share of base salary is higher with family-member CEOs than it is with nonfamily member CEOs. Furthermore, family-member CEOs receive a lower share of option pay. The paper’s findings have implications for family business research and the executive compensation literature. To make the findings robust, the statistical analysis is performed with both Bayesian and classical frequentist methods.

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File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2008-033.pdf
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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2008-033.

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Length: 32 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2008-033
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  4. Bruno S. Frey & Margit Osterloh, 2004. "Yes, Managers Should Be Paid Like Bureaucrats," CREMA Working Paper Series 2005-03, Center for Research in Economics, Management and the Arts (CREMA).
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  7. Jörn Hendrich Block & Andreas Thams, 2007. "Long-Term Orientation In Family And Non-Family Firms: A Bayesian Analysis," SFB 649 Discussion Papers SFB649DP2007-059, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  8. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
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  17. Leamer, Edward E, 1973. "Multicollinearity: A Bayesian Interpretation," The Review of Economics and Statistics, MIT Press, vol. 55(3), pages 371-80, August.
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  21. Jörn Hendrich Block, 2008. "Family Management, Family Ownership and Downsizing: Evidence from S&P 500 Firms," SFB 649 Discussion Papers SFB649DP2008-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  22. Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers 88-04, Rochester, Business - Managerial Economics Research Center.
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