An Analysis of Executive Compensation in Small Businesses

Kathleen A. Farrell and Drew B. Winters
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Kathleen A. Farrell: University of New England
Drew B. Winters: Texas Tech University

Journal of Entrepreneurial Finance, 2008, vol. 12, issue 3, 1-21

Abstract: Using a broad-based sample of small businesses, we analyze the relation between accounting-based firm performance measures and executive compensation for S-corporations, and C-corporations. After controlling for the potential endogeneity associated with the choice of organizational form, we find a positive relation between executive pay and ROA in S-corporations and C-corporations. We also find a positive relation between executive pay and total asset turnover but the relation is stronger for S-corporations. We document a positive relation between executive salaries and more diffuse ownership, owner managers, and when the founder is the current owner. We find a negative relation between executive salaries and firms with greater than fifty percent family ownership.

Keywords: Compensation; Executive Compensation; Executives (search for similar items in EconPapers)
JEL-codes: G32 L25 M12 M52 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (3)

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