Executive Compensation: A Survey of Theory and Evidence

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper reviews the theoretical and empirical literature on executive compensation. We start by presenting data on the level of CEO and other top executive pay over time and across firms, the changing composition of pay; and the strength of executive incentives. We compare pay in U.S. public firms to private and non-U.S. firms. We then critically analyze three non-exclusive explanations for what drives executive pay -shareholder value maximization by boards, rent extraction by executives, and institutional factors such as regulation, taxation, and accounting policy. We confront each hypothesis with the evidence. While shareholder value maximization is consistent with many practices that initially seem inefficient, no single explanation can account for all facts and historical trends; we highlight major gaps for future research. We discuss evidence on the effects of executive pay, highlighting recent identification strategies, and suggest policy implications grounded in theoretical and empirical research. Our survey has two main goals. First, we aim to tightly link the theoretical literature to the empirical evidence, and combine the insights contributed by all three views on the drivers of pay. Second, we aim to provide a user-friendly guide to executive compensation, presenting shareholder value theories using a simple unifying model, and discussing the challenges and methodological issues with empirical research. JEL-Codes: D310, D860, G340, M120. Terms of use: Documents in

Perceptual Determinants of Executive Compensation: Survey-Based Evidence from India

“…Overall, the application of multiple and combined theoretical perspectives rather than a mono-theoretical view presents an appropriate and adequate epistemological underpinning to these empirical findings. 6 6Similar conclusion has been drawn by Edmans, Gabaix, and Jenter (2017).…”

Pay for Outsiders: Incentive Compensation for Nonfamily Executives in Family Firms*

“…6 6See Edmans et al (2017) for a review of the literature.…”

CEO Compensation: Evidence from the Field

“…This paper builds on the literature on CEO compensation, recently reviewed by Murphy (2013), Gabaix (2016), andJenter (2017). It is also related to other corporate finance surveys, such as Graham and Harvey (2001), Graham, Harvey, and Rajgopal (2005), Brav et al (2005), Ben-David, Puri (2013).…”

“…Section 2.3.2 of the survey byEdmans, Gabaix, and Jenter (2017) lists several papers that find a positive relationship, several that document a negative relationship, and several that show no relationship or mixed results.…”