Determinants and Performance Effects of Executive Pay Multiples

Jae Yong Shin, Sung-Choon Kang, Jeong-Hoon Hyun and Bum-Joon Kim
Additional contact information
Bum-Joon Kim: Jae Yong Shin is an Associate Professor of Accounting at Seoul National University. Sung-Choon Kang is an Associate Professor of Human Resources at Seoul National University. Jeong-Hoon Hyun received his PhD in Accounting from Seoul National University. Bum-Joon Kim received his PhD in Accounting from Seoul National University.

ILR Review, 2015, vol. 68, issue 1, 53-78

Abstract: The authors examine factors influencing the executive pay multiple (executive-employee pay disparity) and its effects on performance. Using unique data from Korea, where all publicly listed firms are required to provide detailed information on average employee pay in their annual reports, they find that a substantial portion of cross-sectional variation in the executive pay multiple is explained by the firm’s economic and political characteristics. Results also indicate that the executive pay multiple has a statistically significant negative relation with subsequent operating and stock return performance. A two-stage approach, however, reveals that the performance effects of the executive pay multiple are likely to be influenced more by deviations from the expected executive pay multiple, estimated using the first-stage determinant model, than by the absolute pay multiple per se. The study sheds light on recent debates regarding the usefulness of executive pay multiple disclosure.

Keywords: executive pay multiple; pay disparity; tournament theory; equity theory; turnover; performance (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://ilr.sagepub.com/content/68/1/53.abstract (text/html)

Related works:
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:sae:ilrrev:v:68:y:2015:i:1:p:53-78

Access Statistics for this article

More articles in ILR Review from Cornell University, ILR School
Bibliographic data for series maintained by SAGE Publications ().