Within-Firm Pay Inequality

Holger M. Mueller, Paige P. Ouimet and Elena Simintzi

The Review of Financial Studies, 2017, vol. 30, issue 10, 3605-3635

Abstract: Financial regulators and investors have expressed concerns about high pay inequality within firms. Using a proprietary data set of public and private firms, this paper shows that firms with higher pay inequality—relative wage differentials between top- and bottom-level jobs—are larger and have higher valuations and stronger operating performance. Moreover, firms with higher pay inequality exhibit larger equity returns and greater earnings surprises, suggesting that pay inequality is not fully priced by the market. Our results support the notion that differences in pay inequality across firms are a reflection of differences in managerial talent. Received March 14, 2016; editorial decision January 21, 2017 by Editor Itay Goldstein.

JEL-codes: G13 G14 J31 L25 M52 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (55)

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The Review of Financial Studies is currently edited by Itay Goldstein

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