Determinants of executive pay in small private firms–initial evidence from Germany

Jochen Bigus (), Aline Grahn () and Mustafa Karakaya ()
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Jochen Bigus: Freie Universität Berlin
Aline Grahn: Freie Universität Berlin
Mustafa Karakaya: Freie Universität Berlin

Journal of Business Economics, 2024, vol. 94, issue 1, No 2, 73 pages

Abstract: Abstract This paper provides initial evidence on executive pay in small private limited liability firms in Germany. More than 80% of the firms report fewer than 50 employees. We find that executive pay increases with firm size and variable pay. We also find weak evidence that executive pay is lower in the presence of female executives, and increases with profitability. Surprisingly, variable pay is related in an inverted U-shape to total salary. Significant executive ownership (> 25%) is associated with higher compensation. Executive pay varies widely by region. Some, but not all results are in line with efficient contracting theory. In sum, we provide novel evidence on executive pay in small private firms outside the U.S.

Keywords: Executive pay; Private firms; Germany; Executive ownership (search for similar items in EconPapers)
JEL-codes: G32 L31 M41 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11573-023-01150-y

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