Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance

• 成果类型: Article
• 署名作者: Rouen, Ethan
• 署名单位: Harvard University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52440
• 发表日期: 2020
• 页码: 343-378
• 关键词: product market competition; RANK-ORDER TOURNAMENTS; executive pay; corporate governance; equity incentives; TOP MANAGEMENT; moral hazard; dispersion; determinants; earnings

摘要

I develop measures of firm-level pay disparity and examine their relation to firm performance. Using comprehensive compensation data for a large sample of firms, I find no statistically significant relation between the ratio of CEO-to-mean employee compensation and performance. I next create empirical models that allow me to separate the components of CEO and employee compensation explained by economic factors from those that are not, and use these models to estimate explained and unexplained pay disparity. After validating my estimate of unexplained pay disparity as a proxy for pay fairness, I find robust evidence of a negative ( positive) relation between unexplained (explained) pay disparity and future firm performance.