CEO pay and the Lake Wobegon Effect

• 成果类型: Article
• 署名作者: Hayes, Rachel M.; Schaefer, Scott
• 署名单位: Utah System of Higher Education; University of Utah; Utah System of Higher Education; University of Utah
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2008.12.006
• 发表日期: 2009
• 页码: 280-290
• 关键词: ceo pay; asymmetric information; signaling

摘要

The Lake Wobegon Effect,'' which is widely cited as a potential cause for rising CEO pay, is said to occur because no firm wants to admit to having a CEO who is below average, and so no firm allows its CEO's pay package to lag market expectations. We develop a game-theoretic model of this Effect. In our model, a CEO's wage may serve as a signal of match surplus, and therefore affect the value of the firm. We compare equilibria of our model to a full-information case and derive conditions under which equilibrium wages are distorted upward. (C) 2009 Elsevier B.V. All rights reserved.