Which U.S. Market Interactions Affect CEO Pay? Evidence from UK Companies

Joseph J. Gerakos (), Joseph D. Piotroski () and Suraj Srinivasan ()
Additional contact information
Joseph J. Gerakos: Booth School of Business, University of Chicago, Chicago, Illinois 60637
Joseph D. Piotroski: Graduate School of Business, Stanford University, Stanford, California 94305
Suraj Srinivasan: Harvard Business School, Harvard University, Cambridge, Massachusetts 02138

Management Science, 2013, vol. 59, issue 11, 2413-2434

Abstract: This paper examines how different types of interactions with U.S. markets by non-U.S. firms are associated with higher levels of CEO pay, greater emphasis on incentive-based compensation, and smaller pay gaps with U.S. firms. Using a sample of CEOs of UK firms and using both broad cross-sectional and narrow event-window tests, we find that capital market relationship in the form of a U.S. exchange listing is related to higher UK CEO pay; however, the effect is similar when UK firms have a listing in any foreign country, implying a foreign listing effect not unique to the United States. Product market relationships measured by the extent of sales in the United States by UK companies are associated with higher pay, greater use of U.S.-style pay arrangements, and a reduction in the U.S.--UK pay gap. The product market effect is incremental to the effect of a U.S. exchange listing, the extent of the firm's non-U.S. foreign market interactions, and the characteristics of the executive. The U.S.--UK CEO pay gap reduces in UK firms that make U.S. acquisitions. Furthermore, the firm's use of a U.S. compensation consultant increases the sensitivity of UK pay practices to U.S. product market relationships. This paper was accepted by Gérard P. Cachon, accounting.

Keywords: CEO compensation; corporate governance; cross-listing; executive pay; globalization; incentives; international pay differences (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2013.1714 (application/pdf)

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:inm:ormnsc:v:59:y:2013:i:11:p:2413-2434

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().