Do Equity Markets Care about Income Inequality? Evidence from Pay Ratio Disclosure

• 成果类型: Article
• 署名作者: Pan, Yihui; Pikulina, Elena S.; Siegel, Stephan; Wang, Tracy Yue
• 署名单位: Utah System of Higher Education; University of Utah; University of British Columbia; University of Washington; University of Washington Seattle; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13113
• 发表日期: 2022
• 页码: 1371-1411
• 关键词: RELIGIOUS BELIEFS; SPORTS SENTIMENT; corporate; companies

摘要

We examine equity markets' reaction to the first-time disclosure of the CEO-worker pay ratio by U.S. public companies in 2018. We find that firms disclosing higher pay ratios experience significantly lower abnormal announcement returns. Firms whose shareholders are more inequality-averse experience a more negative market response to high pay ratios. Furthermore, during 2018 more inequality-averse investors rebalance their portfolios away from stocks with a high pay ratio relative to other investors. Our results suggest that equity markets are concerned about high within-firm pay dispersion, and investors' inequality aversion is a channel through which high pay ratios negatively affect firm value.