What Explains the Rise in CEO Pay in Germany? A Panel Data Analysis for 1977-2009

Francesca Fabbri and Dalia Marin

No 6420, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The compensation of executive board members in Germany has become a highly controversial topic since Vodafone’s hostile takeover of Mannesmann in 2000 and it is again in the spotlight since the outbreak of the financial crisis of 2009. Based on unique panel data evidence of the 500 largest firms in Germany in the period 1977-2009 we test two prominent hypotheses in the literature on executive pay: the manager power hypothesis and the efficient pay hypothesis. We find support for the manager power hypothesis for Germany as executives tend to be rewarded when the sector is doing well rather than the firm they work for. We reject, however, the efficient pay hypothesis as CEO pay and the demand for managers increases in Germany in difficult times when the typical firm size shrinks. We find further that domestic and global competition for managers has contributed to the rise in executive pay in Germany. Lastly, we show that CEOs in the banking sector are provided with incentives for performance and that the great recession of 2009 acted as a disciplining devise on CEO pay in Germany.

Keywords: corporate governance; executive compensation (search for similar items in EconPapers)
JEL-codes: F23 J3 M12 M52 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012-03
New Economics Papers: this item is included in nep-bec, nep-eur and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published - published in: Scandinavian Journal of Economics, 2016, 118 (2), 235-263

Downloads: (external link)
https://docs.iza.org/dp6420.pdf (application/pdf)

Related works:
Working Paper: What Explains the Rise in CEO Pay in Germany? A Panel Data Analysis for 1977-2009 (2012)
Working Paper: What Explains the Rise in CEO Pay in Germany? A Panel Data Analysis for 1977-2009 (2012)
Working Paper: What Explains the Rise in CEO Pay in Germany? A Panel Data Analysis for 1977-2009 (2012)
Working Paper: What explains the rise in CEO pay in Germany? A Panel Data Analysis for 1977-2009 (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp6420

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().