Does geographical location matter for managerial compensation design?

Jing Zhang () and Jieun Chung ()
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Jing Zhang: University of Alabama in Huntsville
Jieun Chung: Concordia University

Journal of Economics and Finance, 2018, vol. 42, issue 1, No 1, 32 pages

Abstract: Abstract This paper examines the role of firm location in relation to managers’ compensation structure. We find that managers in remotely located firms have compensation packages with lower pay-for-performance (and pay-for-risk) sensitivity, which suggests that managers in rural areas can exert more influence on their pay and receive a compensation package that is more favorable to them. However, this impact of geographical location on managers’ pay is mitigated by the presence of institutional investors. Last, we find that managers in rural firms take lower risks than their peers in urban firms. Overall, our evidence is in support of managerial entrenchment in rural firms.

Keywords: Managerial compensation; Pay incentives; Geographical location; Risk-taking; Institutional investors (search for similar items in EconPapers)
JEL-codes: G30 J33 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s12197-016-9383-5

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